Finance Essentials

Used Car Financing for Rural India

21 Dec 2016 12:12

With over 6.38 lakh villages in India, a majority of the population is engaged in agriculture, which is the main source of income. Hence, it would only be right to say that a large portion of the country is dominated by the rural setup. Almost any business that is able to penetrate successfully into these areas would be able to reach heights of success. This holds true even for the automobile industry in India, where used car dealers are experiencing huge sales for second-hand cars.

Scenario in rural India
According to a survey conducted by National Sample Survey Office (NSSO), among other durable items consumed by domestic households in rural India, expenditure on cars topped the charts with a whopping 44.71%. This indicates that the sale of cars in rural India is increasing rapidly.
The rising disposable income in these areas has contributed greatly to the increase in car purchases. Another point to be noted here is that most car sales have been driven by Bolero, which is a high utility vehicle, suitable for rural roads. This indicates that individuals in rural India are not only driven by comfort but also by practicality.

Used car financing
While purchasing a brand new car may be an expensive affair for the people in the rural sector, a used car makes much more financial sense. Finance being a major roadblock in the way of rural people, purchasing a used car is now convenient through loans. While most financial institutions provide commercial vehicle loans quite easily, loans for used cars took a long time to establish itself in the rural market. Today, many banks and financial institutions provide used car loans in the rural market. Given the high potential in such areas, lenders are entering the rural sector at a rapid rate.

One of the prerequisites to successfully manage the sales of second-hand cars in rural areas is the provision of easily accessible touch points and service centres. Financial assistance also plays a major role in prompting rural consumers to purchase used cars. Today, pre-owned car loans are disbursed to consumers without much hassle. Also, the demand for used cars is increasing steadily due to a number of reasons like shorter holding period of the cars and entry of organized sellers.
Tapping the rural population at one point of time was a challenge. However, because of the availability of good conditioned cars, used car loans, and easy access to organized sellers, the number of individuals opting for a second-hand car has now increased. With the benefits such cars have to offer, pre-owned vehicles have become a popular option for the masses.