According to Ashutosh Pandey, CEO, Mahindra First Choice, currently only 20-30 per cent used car buyers opt for finance options, but in the next 3 to 4 months that will grow up to 50 per cent.
The coronavirus pandemic has had some unprecedented effects on the auto sector. Right from business strategies to consumer mindset, things will be a lot different in the post-COVID world. Now, Ashutosh Pandey, CEO, Mahindra First Choice, the used car division of Mahindra and Mahindra, has told carandbike that going forwards, up to 50 per cent of used car buyers will opt for finance options over making full cash purchases. The information was shared with us in the latest episode of Freewheeling with SVP, and giving an example of Mahindra First Choice customers, Ashutosh said that currently, only 20-30 per cent of buyers opt for a loan while buying a used car.
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Explaining how the finance options for used cars market will evolve post the coronavirus crisis, Pandey said, “There is a much significant difference in loan penetration between new cars and used cars. On an average, our IBB (Indian Blue Book) research showed last year that the loan penetration in used cars was about 18 per cent, whereas, in the case of new cars, it was close to 70 per cent, and the IRR (Internal rate of return) or rate of interest, was actually 300 to 400 basis points higher for used cars. So, what will happen going forward, especially in the organised segment of used cars, is that this IRR gap will come down. So, we anticipate the IRR gap to come down by at least 200 basis points.”
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Ashutosh said that Mahindra First Choice has spoken to all its dealer partners to come up with a good IRR loan structure for its customers, and to this, he added, “There were many banks who are willing to do it provided that had a comfort that the vehicle had been inspected, it passed our quality checks, it was certified by Mahindra First Choice. And we have kind of put our thing on the line, and I think a majority of the customers, that is, sales that we’ll see in the next few months will all be financed. I think that’s a great time for used car industry because the moment financiers start having confidence in the vehicles, customers will kind of start flocking it.”
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In fact, in a recent survey conducted by carandbike, we found that most consumers will opt for a loan while buying a car. In fact, 60 per cent of people said they will stick to taking a loan to buy a car, while 15 per cent people who earlier planned to make a full cash payment, now plan to take a loan. 20 per cent people said they will stick to buying a car with full cash payment, while 5 per cent of respondents, who earlier planned to take a loan, now plan to make full payment.