Data from the International Organization of Motor Vehicle Manufacturers suggests that the automotive industry should record double-digit CAGR by the year 2028. Not all customers can afford new cars, meaning that a significant chunk of this growth is due to the used vehicle market. While the average holding time of vehicles has dropped in the last decade, the used vehicle market provides a diverse range of options for both first time buyers or repeat purchasers.
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Fear of Contracting COVID-19 Has Led to Shift From Public Transport to Private Mobility
Ride sharing may be convenient for commuters but is a major concern for financers and used car dealers. If ride sharing continues to gain popularity, the number of owners during a car’s lifespan will be drastically reduced, posing challenges to growth in the used vehicle market. However, COVID-19 has provided an unexpected silver lining to the used vehicle market as the mandates for social distancing and the fear of contracting this deadly virus has compelled customers to invest in personal mobility.
SUV’s More Profitable But Unlikely To Race Ahead of Budget Cars in Used Vehicle Market
Entry-level offerings are expected to account for the maximum share in the used vehicle market, largely due to changing consumer preferences towards budget and fuel-efficient vehicles. With respect to supply, a larger inventory coupled with higher production leads to a streamlined supply chain for budget cars. Conversely, SUV’s have proven to be lucrative for carmakers as their residual value and distribution network is widespread, making it unwise to overlook this segment of the used vehicle market.
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Highly Fragmented Used Vehicle Market Made More Cutthroat With Entry of Luxury Cars
Automakers often prioritize new vehicles in their line-up at the expense of used vehicles. Only recently have they realised the folly of such a flawed competition strategy and taken corrective measures. Global carmakers now play a major role in used vehicle dealership outlets and conduct surveys to determine consumer purchase behaviour. The used vehicle market is characterised by cutthroat competition leading to a highly fragmented landscape. While the vast majority of companies are local and unorganized, it is quite likely that strategic partnerships will emerge in the near future. New product segments have been introduced by incumbents as well as entrants in the used vehicle market with even luxury carmakers such as Audi, BMW, and Mercedes-Benz entering the fray.
A few companies profiled in this exhaustive report on the used vehicle market comprise True Car, Droom Technology Pvt Ltd, CarMax Inc, Penske Automotive Groups, Lithia Motors, Pendragon PLC, and Emil Frey Classics AG.
Expensive Financing a Huge Challenge to Overcome in the Used Vehicles Market
Pricing competition is a hallmark of companies operating in the used vehicle market and they are upping their investment through dealership expansions. Online sales of used vehicles have skyrocketed. Research suggests that financing is relatively expensive for used vehicles compared to new cars, potentially restricting growth in the used vehicle market. The used vehicle market is also benefiting from higher disposable incomes and relaxed import norms in multiple countries. In addition, the emergence of franchisees and car selling platforms such as Fair and Vroom work to the benefit of the overall used vehicle market.
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