Used-car Sales Likely To Outpace New Ones In FY26

India's used car market, which has been growing steadily at 10-12 per cent over the last 2-3 years, is expected to reach $40 billion in FY26.

Used car sales may surge ahead of new cars in 2025-26, say industry insiders. As demand rises, the average selling price of used cars, too, is set to increase.

India's used car market, which has been growing steadily at 10-12 per cent over the last 2-3 years, is expected to reach $40 billion in FY26.

This translates into an expected 6.5-7 million used car sales in terms of volumes, said Niraj Singh, founder and chief executive officer (CEO) at Spinny, a leading used car platform.

The domestic new car market is expected to be around $43 billion or so during this period. This rise will fuel growth in segments like tyres and financing, among others.

The new car market touched a historic high of 4.2 million units in 2023-24, and this year is expected to end on a flat note.

In FY26, new car sales are expected to grow by 1-2 per cent or touch around 4.5-4.6 million units. 

On the contrary, the used car market is witnessing a strong growth in cities like Bengaluru, Hyderabad and Pune, which have seen the highest growth recently.

Singh said he sees the market growing at a healthy 12-13 per cent compound annual growth rate (CAGR) over the next 7-8 years.

“In terms of markets, Bengaluru, Hyderabad and Pune have seen the highest growth recently. In terms of price points, cars in the ₹6-8 lakh range (especially compact SUVs) have seen the highest surge in demand. It is driven by their performance, space, affordability and 'big car' appeal,” Singh told Business Standard.

Buoyed by demand, the average selling price of used cars in India has been on the rise. Singh added, “The average selling price of used cars in India is in the ₹4.5-5 lakh range. They have risen by 10-15 per cent over the last 2-3 years.”

For budget cars (₹3-5 lakh range), prices have increased by 10-12 per cent. Mid-range vehicles (₹5-10 lakh) have seen a 14-16 per cent hike in prices.

Premium and SUV models have experienced the sharpest rise -- up to 20 per cent -- due to higher demand and limited supply.

Another factor driving used car growth is that the average ownership period has come down. 

Singh said, “The average ownership period has also come down from 6-8 years from a decade ago, to 4-5 years now. Spinny is also seeing major growth in customers upgrading their cars (up from 12 per cent in 2023 to 22 per cent in 2024). This is simultaneously adding to the supply of used cars.”

Affordable hatchbacks continue to be the highest-selling used cars, with compact SUVs also seeing a surge in demand in the last one year.

Renault Kwid, Hyundai Grand i10, Maruti Suzuki Swift, Maruti Suzuki Baleno and Honda City are the most loved car models among Spinny customers.

This is in sharp contrast to the new car sales trend. For example, Maruti Suzuki India (MSIL) has seen sales of its mini cars (Alto and S-Presso) drop by 12.3 per cent year-on-year (Y-o-Y) between April and February 2024-25. Sales of its compact cars (Baleno, Celerio, Swift, WagonR, Ignis and Dzire) fell around 7 per cent during the same period.

Players like Shriram Finance highlights that it expects volume growth in loan book in 2025-26 as more used cars come into the market for resale. 

Umesh Revankar, executive vice-chairman of Shriram Finance, told Business Standard, “Our order book is growing because of value growth only for the last two years. But next year onwards, I see the number of transactions going up because used vehicle supply was less.”

“More used vehicles will come into the market. Post Covid, the number of people wanting to have their own vehicle has gone up. Government spend on public transportation has come down. The rural market prefers second hand vehicles as their first vehicle because capital expenditure is less,” he added.

Revankar said, “For a vehicle like Wagon R, we used to get around ₹2.5 lakh five years back. Now, it is selling at around ₹4 lakh, thanks to rural demand. Some popular vehicles will always have demand in the rural market.” 

Passenger vehicle ownership in India stands at 34 vehicles per 1,000 people. In Europe, it was around 560 vehicles in 2022, and in the US, it stood at 850 vehicles.

The growth in the used car market would also spell good news for ancillaries like tyre makers.

Arnab Banerjee, managing director (MD) & CEO of CEAT, said that typically each customer replaces a tyre once he buys a used car, and used car demand in India is on the rise.

“One-third of the customers go for the original factory fitted tyre brand. Otherwise, people go for any reputed brand in the market. Therefore, replacement demand is set to rise,” Banerjee said.  

Feature Presentation: Rajesh Alva/Rediff.com