The used vehicle market has steadily gained prominence since the 2008 recession and continues to grow at a rapid pace. Several factors contribute to this industry’s ongoing success, including better financing, favorable policies, greater industry player involvement, urbanization, and higher disposable incomes. North America is expected to remain a dominant force in this landscape; however, the Asia Pacific is projected to index a significantly high CAGR over the forecast period. As the global automotive sector gravitates towards the use of more environmentally friendly vehicles, more economical options such as used or pre-owned vehicles are becoming increasingly attractive to consumers.
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Used Vehicle Market Overview
Key Report Findings
The global used vehicle market was valued at over US$ 1.5 trillion in 2021.
The average age of a used vehicle in the US is 11.8 years.
In 2020, 40.4 million used vehicles were sold in the US compared to 14.5 million new vehicles.
The top-selling used car brands in the US are Toyota, Honda, and Ford.
Asia Pacific is expected to account for a significant market share over the forecast period.
The average mileage of used cars sold in the US is 68,000 miles.
Growth Drivers
Affordability and
Greater Need for Private Conveyance
According to the International Organization of Motor Vehicle Manufacturers (OICA), the automotive industry contributes about 4% to the global GDP, with an estimated CAGR of 20.78% by 2028. This highlights the increase in global car ownership, with a sizeable share accounted for through used car ownership, poised for further expansion by 2030. The launch of new entry-level cars is also boosting demand, which can directly affect used vehicle sales.
While the average ownership time of new cars has decreased compared to previous decades, the used car segment offers a wealth of options for first-time car buyers who find it safer to buy second-hand cars until they are proficient in daily driving.
Franchise Dealers Aim to Offer Better Financial Schemes
Competitive pricing has been a significant advantage for companies operating in the used vehicle market. This market receives strong support from key industry participants as they amplify their investments by setting up new dealership networks for used vehicles. Online sales of pre-owned or used cars remain a critical growth factor for the global used vehicle market. Research reveals that while financing options for new cars are relatively abundant, they are quite expensive for used vehicles, which can hinder market growth.
Increased consumer spending on lifestyle choices and a flourishing import-export scenario are expected to benefit the used vehicle market. Certified used vehicle programs and the prevalence of franchise dealers offering better financial schemes create favorable grounds for used car sales. Online platforms such as Vroom and Fair, partnering with OEMs, ensure the reliability of certified used vehicle programs, which is advantageous for the market.
Compact Passenger Cars Segment to Lead, SUVs to Follow
Compact or entry-level cars are expected to account for the largest volume share in the used vehicle market, in line with growing consumer preferences for economic and compact passenger cars. High production rates and significant inventories have also been a preference for most franchise owners, leading to better supply chain management.
On the other hand, SUVs have been on a profitable growth trajectory, offering spacious and compact attributes compared to premium vehicles. The distribution network and residual value for SUVs are relatively high, driving their demand.
Key Market Players Involved in Used Car Dealerships
Automotive industry operators often prioritize new vehicles, but the potential and market worth of used vehicles have recently gained recognition. Global auto giants are now actively involved in used vehicle dealerships, responding to the intense competition and shifting consumer behavior concerning car purchases.
Several new entrants add to the existing fragmented nature of used vehicle market competition. While most participants tend to be unorganized local companies, strategic partnerships are likely in the future. New product segments are being launched by both new and established players. Even premium car companies continue to leverage the market potential of their used cars. Luxury car brands such as Mercedes and Audi have established used car dealerships that contribute significantly to their revenue.
Used passenger cars enjoy a larger share of the global market, leading to several brands launching networks specifically for used cars, such as Toyota’s U Trust and Maruti Suzuki’s True Value. Mainstream companies are investing in strategic expansion through collaborations.
Growth Challenges
Adoption of Ride Sharing Trend
Ride sharing, though economical for consumers, poses a concern for used car dealers and financers. If ride sharing dominates private transportation, there will be fewer owners during a car’s average lifespan, reducing transaction volumes for the used vehicle market. However, the COVID-19 pandemic has led to increased preference for private conveyance over public transport. Used vehicles are gaining traction, especially in developing economies, as they are affordable. Financial disparities toward new vehicle sales favor the used vehicle market.
Growth Opportunities Across Regions
Used Car Market
to Gain Traction in Asia Pacific
North America is expected to account for a significant share of the global used vehicle market, attributed to the extensive presence of used vehicle dealers, favorable economic growth, and the availability of financing. The price of used cars in North America is relatively cheap compared to new vehicles. The Asia Pacific region is expected to show significant growth due to factors such as higher disposable incomes, booming population, urbanization, increasing popularity of cars, and better financing options.
Key Market Players – Used Vehicle Landscape
Some key companies in the global used vehicle market include True Car, Droom Technology Pvt Ltd., CarMax Inc., Penske Automotive Groups, Lithia Motors, Pendragon PLC, and Emil Frey Classics AG. To gain a competitive edge, established industry players focus on new product launches, partnerships, collaborations, acquisitions, and alliances.