The pre-owned car finance market has emerged as one of the fastest growing market in the previous few years. The major players or the financiers in the Pre-Owned car finance market are banks and the NBFC’s wherein the major share has gone to the banks because of the underlying trust of the people in banking system of the country.
The pre-owned car finance industry thereafter followed an upward trend and it is expected that within a year with every one new car sold, almost 1.3 used cars would be sold. Penetration of finance in the pre-owned car market has also observed expansion during the review period.
Pre-owned car finance industry is segmented into online and offline segments. These include loans which are provided online through internet or offline through direct interaction between customer and the financier. Many of the major players in the offline car financing also have their counterparts in the online car financing segment for example HDFC Bank, ICICI Bank and more.
There is a great chain of factors to consider while going for the online or the offline platform. India being a developing country with high youth population and higher broadband penetration, large number of people are dependent on the internet for most of their work. Also, other factors such as interest rate, processing fees and reliability have been considered to opt for either online or offline loans.
The pre-owned car finance market can also be segmented on the basis of the term of the loan. The major fragments consist of the average of 3 year, 5 year and 7 year loans. During FY’2010, loans for pre-owned cars were not very prevalent as compared to the new car segment and the financiers who provided these loans generally provided for a short period of time, mostly for an average term of 3 years.
In India, the pre owned car finance market noticed the highest sale during the 4th quarter (Q4) of FY’2015 due to the plethora of festivals. People possess the mindset to purchase vehicles mostly in this period which have resulted in 30% of total pre-owned cars loan disbursements in the 4th quarter.
The New Car Finance market has emerged as one of the finest growing markets in the previous few years. New car finance market in India has showcased a glorified growth rate, which was determined by several factors such as rising urban population, escalation of personal disposable incomes and growing preferences towards car purchases. Moreover, the emergence of new and upgraded car models in the Indian market has further provided a spurt to the new car finance market.
The aforementioned factors have led the market loan disbursements to grow at an astonishing compound annual growth rate of 10.0% during FY’2010-FY’2015.
The India Car Finance Market has been facing intense competition from a number of players including the banks and the NBFCs with major share of the car finance market accredited to the banks. The NBFCs control less proportionate share as compared to the banks mainly because of the envisaged trust of the country’s population on banks.
This has been made possible by the efforts of government to strengthen the banking system of the country. On the other hand NBFCs also face intense competition amongst themselves with most of them offering similar products.