New Delhi: It is a ripple effect of the excise duty cut on small cars and one that may alter market dynamics. As new small cars become more attractive, CNBC-TV18 finds out that it will also lead to less demand for small used cars and why the big cars are expected to take the driver's seat in the used car market.
It is a ripple effect of the excise duty cut on small cars and one that may alter market dynamics. As new small cars become more attractive, CNBC-TV18 finds out that it will also lead to less demand for small used cars.
Aarif Fazulbhoy, a used car dealer for decades now, is expecting a change in the market. After the 8% reduction of excise duties on small cars, he says it will be difficult to find buyers for used small cars.
He says, "For a 2004 Zen, I used to quote Rs 2.75 lakh before the budget. With the Rs 25,000 reduction in the new Zen after the budget, now I will not be able to sell it for more than Rs 2.5 lakh."
It is not only the drop in prices of new cars. Dealers say it is becoming difficult to sell small cars that are upto 3 or 4 years old as they do not offer much value compared to the small cars with post-budget prices.
With attractive finance options like lower interest rates, 100% finance for new small cars apart from other incentives like free servicing, new small cars are taking away customers from the used car market.
Around 5,000 used cars change hands every month in Mumbai. Now the share of small cars in this pie is likely to fall, thanks to the excise duty reduction and the fast depreciation rate in bigger cars.
Dealers say that bigger cars like Skoda Octavia, Hyundai Sonata and even Mercedes Benz offer better value for money in the used car market as their rates depreciate much faster than the small cars.
And with the latest drop in small car prices, bigger cars are expected to take the driver's seat in the used car market.
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