Car repossessions see sharp surge as used auto market in slow lane

The usually booming used car market is facing a serious demand-supply mismatch. As new model availability has decreased due to semiconductor shortages, consumers are holding on to their old vehicles instead of trading them in.

Resellers are counting on more consumer bad news – a rising number of auto repossessions – to meet the gap in supply.

“Repossessed car stocks are migrating to the used car market as their defaults get cleared through auction processes, following which banks and other financial institutions are offering fresh financing for these cars,” said Sameer Malhotra, Director and CEO, Shriram Automall India, a leading pre- owned vehicles buyer and seller.


The supply is expected to improve over the next 3-6 months, say auto finance companies.

“Finance companies had refrained from repossessing cars during the last two years. Now the supply situation of used cars should improve, after exchange programs commences and also banks & finance companies start repossessing vehicles of defaulting consumers including certain consumers surrendering cars”, mentioned Ramesh Iyer, MD, Mahindra Finance.

Experts say the acute shortage of used cars is mainly for fast moving models including entry level and mid-size models such as Swift, Baleno, i20, Innova etc. Since high-end new cars are available off-the-shelf, their availability on the used market has not suffered, said a senior official from a Chennai-based finance company.

Apart from the longer replacement cycle, lower overall demand for new cars has contributed to the supply shortage in the pre-owned market. And in parallel, these same factors – short supply due to the semiconductor shortage, rising prices adn long waiting lists – has driven up enquiries and demand from first time buyers for used cars in the last CY. .

Ashutosh Pandey, CEO of Mahindra First Choice, the pre-owned vehicle business of Mahindra & Mahindra says with not many cars coming into the used car pool, supply is down by at least 20-25%. “This scenario has also led to prices going up in the used car market, by at least 5-10%. Currently there is a huge waiting period for used cars, between 30-60 days, while earlier used cars were available off the shelf”, says Pandey.

Adds Iyer there is a new segment of buyers refraining from buying new cars and instead settling for the favourite model of used cars. However consumers have to compromise on their wish list as many of the fast moving models may not be easily available.

2021 was a buoyant year for used cars with recorded sales of 3.9 million units. Experts believe that in the calendar year 2022, sales of used cars will exceed 4 million units.

The Indian used car market is seeing a massive growth in the coming years, expected to go up to USD 50 billion by the year 2026 at a CAGR of 15% from current USD 27 billion , according to data provided by Shriram Automall.