IBB Report 2022: Used Car Financing Becomes Increasingly Popular, But 70% Buyers Still Want To Pay Cash

The fifth edition of the Indian Blue Book (IBB) for Financial Year 2021-22 has been released. The latest edition of the used car industry report covers a wide range of topics, including the latest trends, challenges faced by the industry and consumer behaviour and pattern. One of the topics covered in the FY2022 IBB report was used car financing, which according to data is becoming increasingly popular. In FY2021-22 around 70 per cent of used cars purchase transactions happened using personal financing, while 30 per cent buyers took a used car loan. To put things into perspective, in FY2020-21, 87 per cent buyers bought their used cars using personal finances, and just 13 per cent buyers opted for a loan. The growth is even more impressive when we consider the fact that until a few years ago the segment almost entirely functioned on cash transactions.

Also Read: IBB Report 2022: Top 10 Used Cars Purchased In FY2021-22

The report also highlights an important change in the buyers’ behaviour across metro and non-metro cities. The differences in used car buyers’ behaviour across geographies have significantly decreased, as have differences between various age groups. Today, 63 per cent of car buyers, particularly millennials aged between 20 and 40, invest personal savings and liquidity to purchase a vehicle compared to 37 per cent who take out a loan. Self-employed buyers are also more comfortable making purchases using cash and/or borrowing from family and friends.

In non-metro cities, 67 per cent used car transactions were made using personal finances and 33 per cent of car buyers took a loan.

The car&bike analysis revealed that in metro cities, 72 per cent of pre-owned car buyers used their personal savings to buy the vehicle, while only 28 per cent of buyers went for a loan. However, the situation was slightly different in non-metro cities, where used car transactions made using personal finances were a bit lower at 67 per cent, and 33 per cent of car buyers took a loan.

According to the IBB report, used car financing is gaining more and more popularity due to various factors. While on one hand, banks and NBFCs are tempting car buyers with lower rates of interest, on the other hand, the COVID-19 pandemic has aided in declining cash usage. These factors have given buyers the confidence to acquire used cars on loans.