India's used car market to grow 8–10% in FY26, more than 2X the new car sales: Crisil report

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India’s used car market is increasing by the day, with sales volume expected to grow by 8–10% in FY2025–26, according to a report by Crisil Ratings. This growth is more than twice the rate of new car sales and reflects a shift in consumer behaviour towards value-driven and digitally enabled purchases.

The used car segment is likely to cross 6 million units this fiscal year, up from just under 5.5 million units last year. Its market value now rivals that of the new car industry, estimated at ₹4 lakh crore. This shift has also driven the used-to-new car ratio up to 1.4, from below 1 five years ago.

Crisil noted that after a relatively subdued 5% CAGR between FY2017 and FY2024, used car volumes grew 8% last fiscal and are expected to maintain or exceed that pace this year as well.

Anuj Sethi, Senior Director, Crisil Ratings, said, “The improvement in the used‑to‑new car sales ratio to 1.4x from under 1.0x five years ago signals a structural shift, driven by rising consumer confidence and digital adoption. The supply too remains strong with average age of used cars steadily dropping and is expected to reach around 3.7 years, reflecting quicker upgrade cycles and growing preference for utility vehicles, mirroring new car trends.”

Supply-side resilience and rising demand have further strengthened the used car market. A shortage of new cars caused by rare earth magnet issues and global chip shortages has pushed buyers toward pre-owned options. At the same time, first-time buyers are increasingly drawn to used vehicles due to a broader variety of available models and improved financing options, aided by digital platforms and AI-driven underwriting.

Despite the growth, profitability in the organised used car segment remains elusive. Players continue to grapple with high operating costs from logistics, refurbishment, and financing, leading to ongoing cash losses. However, Crisil expects strong revenue growth to help players reach operating breakeven in the next 12 to 18 months.

The CRISIL report says that India still lags behind mature markets in used-to-new car ratios. While India stands at 1.4x, the US boasts 2.5x, the UK 4x, Germany 2.6x, and France 3x, showing there’s ample headroom for future growth.

Crisil also noted that organised players have raised over ₹14,000 crore in equity since FY2019. With current cash reserves, they are well-positioned to fund capital expenditure of ₹800–1,000 crore this fiscal, focusing on expanding inspection hubs and upgrading technology infrastructure.