India’s used car market has entered a high-growth phase, reflecting a clear structural shift in consumer demand. After years of sluggish expansion, the segment grew 8% in FY25, with FY26 growth expected to touch 10%.
Sales volumes are set to cross the 6-million-unit mark this fiscal. The used-to-new car sales ratio has reached 1.4x, a significant increase from less than 1.0 five years ago. This growth is being driven by a rising preference for value-for-money mobility solutions, especially in a post-pandemic landscape where cost sensitivity remains high.
The used car segment is also increasingly seen as a reliable, first-choice option for new-age consumers, thanks to greater digital access and easier financing. These dynamics indicate that used vehicles are no longer a fallback option, but a mainstream choice for a broad swath of buyers.
Evolving Consumer Behavior and Vehicle Trends. Underlying the volume surge is a fundamental evolution in consumer mindset. Buyers are upgrading vehicles more quickly, leading to a younger pool of available used cars. The average age of used cars sold has declined from 5.3 years in FY17 to a projected 3.7 years in FY26. This reflects faster ownership cycles and improved supply quality.
Demand is increasingly skewing toward utility vehicles and compact SUVs, aligning closely with new car market preferences. Moreover, global supply chain disruptions—such as semiconductors and rare-earth magnet shortages—have increased waiting periods for new cars, further shifting attention toward pre-owned vehicles that offer quicker delivery and lower upfront costs. First-time buyers, in particular, are finding better availability and broader choice in the used segment.
Role of Organized Platforms and Profitability Pressures. Organized players have expanded their footprint significantly and now contribute to roughly one-third of total used car sales. These companies offer full-stack services including inspection, refurbishment, financing, insurance, and doorstep delivery—features that have enhanced customer confidence and formalized what was once a highly fragmented market.
However, profitability remains a critical concern. Despite strong revenue growth, high costs associated with logistics, customer acquisition, and vehicle refurbishment continue to weigh heavily on operating margins. While topline expansion is robust—with revenues for leading platforms expected to rise from ₹6,500 crore in FY22 to ₹16,500 crore in FY26—many players are still operating at thin or negative margins. Achieving breakeven within the next 12 to 18 months will require disciplined cost management and operational efficiency.
Capital Deployment and Liquidity Challenges. Capital investment has played a vital role in scaling the organized used car ecosystem. Since FY19, players have raised over ₹14,000 crore in equity funding to build inspection hubs, expand logistics capabilities, and develop technology platforms. For the current fiscal year, planned capital expenditures range between ₹800 and ₹1,000 crore. However, liquidity pressures are emerging as fundraising becomes more selective, with investors increasingly focused on profitability. Access to bank credit remains limited due to ongoing cash losses and insufficient tangible collateral, especially for asset-light models. Inventory-led businesses may have an edge in securing credit, but a broad recovery in funding access is likely to depend on visible improvement in operating performance.
Source: Business Standard.com Read The Article
PSR Analysis. India’s used car market is transitioning from informal growth to institutional scale. The rise in the used-to-new car sales ratio, shrinking vehicle age, and digital-led transaction models all point to a maturing ecosystem.
Yet, the real test lies in balancing growth with profitability. Organized players must now pivot from scale-at-any-cost strategies to sustainable business models focused on cost control, liquidity management, and customer trust. With the right focus, India has the potential to close the gap with global benchmarks and establish used vehicles as a core pillar of its automotive future. PSR
Aditya Kondejkar is Research Analyst – South Asia Operations for Power Systems Research
