New Delhi: The sales volume of used cars in India is expected to cross 6 million units this fiscal, driven by value-conscious demand, rising digital adoption, and better access to finance, credit rating agency Crisil Ratings said in a report.
This growth has pushed the used-to-new car sales ratio to 1.4, up from less than 1 five years ago, with used car volumes growing more than twice as fast as new car sales. After a tepid 5% volume growth between fiscal 2017 and 2024, used vehicle sales grew by a strong 8% last fiscal and are poised to grow up to 10% this fiscal as well, the rating agency noted.
The market value of used cars is estimated at around ₹4 lakh crore, nearly matching the value of new car sales. Organised players in the segment are incurring high operational costs for refurbishment, logistics, and financing, as the sector is in expansion mode—resulting in continued cash losses. However, strong revenue growth is expected to drive breakeven at the operating profit level over this fiscal and the next. Until then, the credit profiles of players will largely depend on timely fund-raising and maintaining adequate liquidity to support growth.
Anuj Sethi, Senior Director, Crisil Ratings, said, “The improvement in the used-to-new car sales ratio to 1.4x from under 1.0x five years ago signals a structural shift, driven by rising consumer confidence and digital adoption. Supply also remains strong, with the average age of used cars steadily dropping—expected to reach around 3.7 years—reflecting quicker upgrade cycles and growing preference for utility vehicles, mirroring new car trends.”
The report further noted that there is significant headroom for growth, as India’s used-to-new car sales ratio of 1.4 still lags behind mature markets such as the US (2.5x), UK (4.0x), Germany (2.6x), and France (3.0x).
The segment, which remained stable even during the pandemic and the semiconductor shortage that disrupted new car production, is expected to stay resilient. Current rare earth magnet shortages continue to delay new car deliveries, prompting buyers to opt for pre-owned vehicles for quicker access.
Moreover, first-time buyers now have a wider range of used car models to choose from, thanks to healthy new car sales in the post-pandemic period. Additionally, improved access to vehicle finance—driven by partnerships between lenders and digital platforms and the use of AI-based underwriting—is likely to support this shift. Strong growth has led to expansion among organised players in the used car segment, though profitability remains a challenge.
Poonam Upadhyay, Director, Crisil Ratings, said, “High costs of customer acquisition, logistics, and refurbishment continue to weigh on operating margins, which remain thin or negative for many players. However, the shift toward integrated service offerings—including inspection, refurbishment, financing, insurance, and doorstep delivery—along with tighter cost control, should gradually reduce losses. If the current momentum on cost agility continues, most players are likely to achieve operating breakeven within the next 12–18 months.”
The report added that most players have sufficient cash reserves from earlier funding rounds to cover operational expenses and capex of ₹800–1,000 crore this fiscal, focused on scaling inspection hubs and strengthening technology infrastructure.
Organised players have collectively raised over ₹14,000 crore in equity since fiscal 2019. However, over the past two fiscals, they have shifted their focus toward improving profitability and operational efficiency and have become more selective in raising funds. While bank credit remains constrained due to ongoing cash burn, it is expected to pick up—particularly for inventory-led players with tangible collateral, the report added.
Looking ahead, the used car market is expected to remain structurally sound, though the availability of quality inventory will be a key factor to watch, according to Crisil Ratings.