New Delhi, Sept. 13 -- There is something wonderfully elastic about the value of a used car in India. It can shrink dramatically when you are selling it. And expand with supernatural enthusiasm when someone is selling it to you. Try selling a two-year-old car and you are told that the market is weak, the variant unpopular, colour difficult, mileage high, tyres need changing and, of course, nobody really wants that model anymore.
Try buying the same car a few days later and watch the transformation. It is now a 'well-maintained, single-owner example' equipped with premium accessories, additional loadings and excellent city usability. The very features that dragged down its value when you owned it have somehow become reasons for the next buyer to pay more. Welcome to India's wonderfully creative used-car market.
The Two Prices
The basic problem is simple. The person selling the car knows what he paid for it, how much he spent maintaining it and how much emotional attachment he has developed to it. What he does not know is what the market is actually prepared to pay. The dealer knows far more. He knows what similar cars are going for. He knows what it will cost to refurbish the car, how much margin he wants, how quickly he needs to move it and even how urgently the seller needs to get rid of it.
That is hardly an even negotiation. The seller hears the litany: "This model has no resale; nobody wants it. The accessories don't have value. We will have to spend on it." Then the car disappears into the system. A little later, it reappears with a different biography and a mysteriously higher asking price. The car has not become younger. The engine hasn't discovered extra horses. The tyres haven't grown new tread. Yet, its value has undergone a spiritual transformation.
What Accessories?
Accessories are a standout example. When you sell, the alloys you bought, the upgraded infotainment system, the reverse camera, the dashcam, the premium floor mats or the fancy lights are treated as though they were embarrassing personal indulgences. "They don't have resale value," you are told.
Fair enough. Until you try buying a used car. Those same accessories are suddenly part of a great package worth tens of thousands of rupees. The previous owner spent heavily on them and you are, therefore, getting excellent value. There is a philosophical lesson here: accessories have no value when leaving your pocket, but considerable value when entering somebody else's.
The Makeover
Variants provide another source of amusement. Take the iMT, for instance. When an owner wants to sell, the transmission acquires an unfortunate reputation. It is an awkward variant-not quite manual, not quite automatic; a little niche and tough to sell. After the sale, the same car undergoes a miraculous makeover. It is now a practical city car. No clutch. Easy driving in traffic. Manual-like control without the fatigue of operating a clutch. The vehicle has not changed. The audience has.
This is not to say every dealer plays games. Used-car retail is a business, and any business is entitled to make money. The problem begins when the buyer or seller has no reliable way of knowing where the legitimate margin ends and the creative storytelling begins.
Buyers Beware
There is a serious side too. A used car can look magnificent and still conceal a history that only a trained eye or a diagnostic machine can uncover. A temporary fix may have been made to survive a sale, not last for a few years. Parts can be changed. Tyres can be swapped. Cosmetic work can make accident damage look less dramatic than it was.
Accessories? They have an extraordinary ability to migrate. The expensive alloy wheels that attracted you to one car may not necessarily remain there forever. Nor should a buyer assume that every shiny addition visible in the photographs is permanently married to the vehicle. This does not mean that every used car is a trap. There are superb used cars available, often at prices that make new-car buyers wonder why they are paying so much for the privilege of removing the polythene from a new seat.
But the buyer has to do the homework.
Dealer's Margin
The used-car business has made buying and selling easier, cleaner and more convenient. Platforms have brought technology, financing, warranties, inspections and processes into a market that was once dominated by the neighbourhood dealer and a handwritten 'For Sale' sign. That's progress.
But convenience comes at a price, and the customer should understand what that price is. A platform or dealer has to refurbish the car, pay staff, maintain facilities, handle paperwork, provide warranties, finance inventory and absorb the risk of a car sitting unsold. There is nothing wrong with making money from that business. The question is whether the seller understands the spread between the price at which his car is bought and what it is eventually sold for.
That is where the Indian used-car market needs something it has historically lacked: transparency. The seller should know why his car is being valued at a particular number. The buyer should know why another number is being demanded. The condition of the vehicle should be third-party verifiable. Accessories should have a rational value. Repairs should be disclosed. And the market value of a car should not depend on which side of the desk you are sitting on.
In India, a car has two lives: one before the dealer buys it and another after. In the first, it depreciates, is difficult to sell and comes burdened with worthless accessories. In the second, it is 'well maintained', feature-loaded and attractively priced. The miracle is not that used cars depreciate. It is that they seem to appreciate between owners. Perhaps it is time for the market to explain that trick.
Published by HT Digital Content Services with permission from Millennium Post.