Volume : 5 | Issue : 11 | November-2016 ISSN - 2250-1991 | IF : 5.215 | IC Value : 77.

65

Original Research Paper Management

A Study on Consumer Behavior Towards Pre-

Owned Cars in India”

*Dr. Shiva Shankar.

Chairman, MBA Department, Tumkur University, Tumkur.
K.C
India, the competition between pre-owned cars and new cars has reached its peak. All these pre-owned cars are generally
termed as “Certified Used Cars”, as they are provided warranty and certified quality from the car dealers. Different car
manufacturers have entered the pre-owned car business with different objectives, and they have different marketing
strategies and priorities in entering into the pre-owned car business. The objectives of the study were to study the preference
of customers towards organized and unorganized market during the purchase of pre-owned car, to explore the factors
ABSTRACT

influencing the purchase behavior of customers towards the purchase of a pre-owned car and to understand the pre-owned
car market in India.
The Research design was Descriptive research design. The primary data has been collected through semi-structured
questionnaire from a sample of 20 unorganized pre-owned car dealers and 30 organized pre-owned car dealers of car
makers, in Mysore. The sampling method was Random Method. The data has been analyzed using SPSS for statistical
analysis and testing of hypothesis. Percentage method and T- Test has been used for analysis the data. The pre-owned car
market may be transformed into a more organized market with the advent of Indian and global car makers and other major
corporate houses of India.

KEYWORDS Pre- Owned Cars, Car Market, Consumer Behaviour, Organized and Unorganized Market.

INTRODUCTION and unorganized market during the purchase of pre-

The used car market has been in the Indian auto market for owned car.
years, but due to risky and unorganized nature of buying • To explore the factors influencing the purchase behavior
used cars without any warranty, and due to lack of certifica- of customers towards the purchase of a pre-owned car.
tion of used cars, the pre-owned car business has been un- • To understand the pre-owned car market in India.
able to become a significant part of the auto industry. From
the last four years, with major car manufacturers entering into SCOPE OF THE STUDY
the pre-owned car business in a big way. India, the compe- This study is an attempt to analyze the consumer buying be-
tition between pre-owned cars and new cars has reached its havior and preference towards the usage of used cars and the
peak. All these pre-owned cars are generally termed as “Cer- Consumer search things for their need satisfaction. Also eval-
tified Used Cars”, as they are provided warranty and certified uation of the used car markets organized and unorganized,
quality from the car dealers. Different car manufacturers have how consumers react and respond towards used car markets.
entered the pre-owned car business with different objectives, So the scope of this study is to cover the full view of the cus-
and they have different marketing strategies and priorities in tomer and their preference pattern and used car market
entering into the pre-owned car business. Maruti Udyog Limit-
ed is the first car maker to enter into the pre-owned car busi- Review of Literature
ness in a more organized way with their “Maruti True Value” A used car can be much cheaper than its new counterpart.
brand of outlets. There are various reasons behind the entry The depreciation is lesser and car financing too can be ob-
of car makers into pre-owned car business like; attractive ex- tained easily. A survey was conducted and it was revealed that
change offers, by exchanging used cars for a new car model. the demand for the used car market in India per year is 1.4
Resale value for an example, MUL’s Wagon R, Alto and Swift million cars (Carazoo 2012).
are the top used car brands in India for their high resale val-
ue, which in turn leads to an increased demand of new car India represents one of the world’s largest car markets. Easy
sales due to its brand value. Another reason is Customer availability of finance, and rising income levels are encourag-
Retention; a market leader can retain their loyal customers ing the launch of new car models which have been leading to
through an exchange program. Car manufacturers especially a stupendous growth of the industry for the past few years.
who are market leaders in a specific segment can win back Besides, the entry of various international players has also had
their lost customers by exchanging new cars of their compa- a positive impact on the used car market. Thus, the demand
ny brand for used cars of other competitor brands. Support of for used cars is anticipated to continue to grow at a stupen-
commercial Banks is another factor through which the dealers dous rate in the future. According to the latest study on the
get attracted towards the pre-owned car sector, support and sector, the Indian used car industry possesses a significant po-
collaboration with commercial banks for used car business has tential, with overall market expected to grow at a CAGR of
also motivated car makers to enter into the used car market. around 22% during 2011-2014 to reach 3.9 Million Units by
Commercial banks are providing loans up to 60%-90% of the 2014-end (RNCOS E-Services Private Limited 2011)
used car value. Competitive Strategy; it is another reason as
a majority of the car makers are entering the pre-owned car Owners of used cars have an informational advantage over
market, so every car maker wants its presence for this strate- potential buyers with respect to the quality of their vehicles.
gic reason. Owners of bad cars will try to sell them to unsuspecting buy-
ers while owners of good cars will hold on to theirs. Conse-
OBJECTIVES quently, the quality of traded automobiles should be sub-av-
The following are the objectives: erage (WinandEmons 2002). New car dealers (who sell both
new and used cars) differ from used car dealers (who sell only
• To study the preference of customers towards organized used cars) in the propensity to sell trade-ins on the wholesale

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Volume : 5 | Issue : 11 | November-2016 ISSN - 2250-1991 | IF : 5.215 | IC Value : 77.65

market. Models of adverse selection suggest that the deal- After sales 50 2.84 1.131 -1.000 .322
er type that sells a higher proportion of its trade-ins on the services
wholesale market will sell, on average, cars of higher quality Second Car 50 2.88 1.189 -.714 .479
Seperate car 50 3.52 1.199 3.066 .004
and receive in return a higher price (David Genesove 1993).
Gift 50 2.48 1.266 -2.905 .005
Economic studies have shown that the prices of used cars de-
cline with age at a constant exponential rate (Susan Rose Ack- From the above table following inferences were drawn:
erman 2007).
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the
RESEARCH METHODOLOGY perception of respondents towards upgrading driving skills
Research Design: Descriptive research design while purchasing the used cars was significant at 5% levels.

Primary Data Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the
The primary data has been collected through semi-structured perception of respondents towards desire to own car while
questionnaire from a sample of 20 unorganized pre-owned purchasing the used cars was significant at 5% levels.
car dealers and 30 organized pre-owned car dealers of car
makers, in Mysore. Since P = 0.002 < 0.05 test was significant at 5% levels. i.e.
the perception of respondents towards Budget constraint
Secondary Data while purchasing the used cars was significant at 5% levels.
The secondary data has been collected from various auto
magazines, journals, newspapers and online information relat- Since P = 0.096> 0.05 test was not significant at 5% levels.
ed to the pre-owned car Market. i.e. the perception of respondents towards Cheaper than new
car while purchasing the used cars was not significant at 5%
Sampling Size-50 levels.
Sampling Method – Random Method
Since P = 0.303 > 0.05 test was not significant at 5% levels.
Statistical Tool i.e. the perception of respondents towards Resale Value while
The data has been analyzed using SPSS for statistical analysis purchasing the used cars was not significant at 5% levels.
and testing of hypothesis. Percentage method and T- Test has
been used for analysis the data. Since P = 0.214 > 0.05 test was not significant at 5% levels.
i.e. the perception of respondents towards Company Image
LIMITATIONS while purchasing the used cars was not significant at 5% lev-
• Following are the limitations of the study. els.
• Lack of Time was the most important limitation.
• Sample size was only 50. Since P = 0.420 > 0.05 test was not significant at 5% lev-
• Study restricted to Mysore only. els. i.e. the perception of respondents towards Availability of
• The Study restricted to pre-owned car market. Spare Parts while purchasing the used cars was not significant
• DATA ANALYSIS AND INTERPRETATION at 5% levels.

HYPOTHESIS Since P = 0.322 > 0.05 test was not significant at 5% levels.
fulfill the objective of the study, following statistical hypothesis i.e. the perception of respondents towards After Sale Servic-
es while purchasing the used cars was not significant at 5%
levels.
was constructed and tested subsequently.
Since P = 0.479> 0.05 test was not significant at 5% levels.
H01: Factors Not influencing perception of customers towards i.e. the perception of respondents towards Second Car while
pre-owned cars. purchasing the used cars was not significant at 5% levels.

H11: Factors influencing perception of customers towards pre- Since P = 0.004 < 0.05 test was significant at 5% levels. i.e.
owned cars. the perception of respondents towards Separate Car while
purchasing the used cars was significant at 5% levels.
H02: Reasons are not influencing preference towards Un-or-
ganized market for the purchase of pre-owned cars. Since P = 0.005> 0.05 test was not significant at 5% levels.
i.e. the perception of respondents towards Gift while purchas-
H12: Reasons are influencing preference towards Un-organ- ing the used cars was not significant at 5% levels.
ized market for the purchase of pre-owned cars.
For Un-organized Market:
H03: Reasons are not influencing preference towards organ- One-Sample t-test
ized market for the purchase of pre-owned cars.
N Mean Std.
Deviation t-value Sig.
H13: Reasons are influencing preference towards organized Clear title 50 4.18 .748 11.162 .000
market for the purchase of pre-owned cars. Mutual trust 50 3.74 .899 5.819 .000
Genuine 50 3.24 .938 1.809 .077
Overall Consumer perception while buying pre-owned car: Spare parts
Resale 50 2.56 1.280 -2.430 .019
One-Sample t-test Negotiation 50 3.24 1.364 1.244 .219
N Mean Std.
Deviation t-value Sig. From the above table following inferences were drawn:
Driving skill 50 4.06 .767 9.773 .000
Desire 50 3.82 .873 6.639 .000 Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the
Budget 50 3.50 1.074 3.293 .002 perception of respondents towards Un-organized market is to
Cheaper 50 3.32 1.332 1.699 .096 have clear title while purchasing the used cars was significant
Resale Value 50 2.82 1.224 -1.040 .303 at 5% levels.
Company 50 2.76 1.349 -1.258 .214
Image Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the
Availability of 50 2.88 1.043 -.814 .420 perception of respondents towards Un-organized market is to
Spare parts have Mutual trust while purchasing the used cars was signifi-
cant at 5% levels.

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Since P = 0.077> 0.05 test was not significant at 5% levels. is to have Extension of warranty while purchasing the used
i.e. the perception of respondents towards Un-organized mar- cars was not significant at 5% levels.
ket is to have Genuine spare parts while purchasing the used
cars was not significant at 5% levels. Since P = 0.004 < 0.05 test was significant at 5% levels. i.e.
the perception of respondents towards Organized market is to
Since P = 0.019 < 0.05 test was significant at 5% levels. i.e. have Free service while purchasing the used cars was signifi-
the perception of respondents towards Un-organized market cant at 5% levels.
is to have Resale while purchasing the used cars was signifi-
cant at 5% levels. FINDINGS:
Following results were listed from the analysis made above:
Since P = 0.219> 0.05 test was not significant at 5% levels.
i.e. the perception of respondents towards Un-organized mar- For Organized market:
ket is to have Negotiation while purchasing the used cars was The perception of respondents towards organized market is to
not significant at 5% levels. have clear title, Professional Assistance, Easy financing,
after sale services, Fair Price and Free service while pur-
For Organized Market: chasing the used cars was significant.
One-Sample t-test
The perception of respondents towards organized market is to
N Mean Std.
Deviation t-value Sig. have genuine spare parts, Certification and Extension of war-
Clear title 50 4.24 .797 11.002 .000 ranty while purchasing the used cars was not significant.
Professional 50 3.96 .947 7.170 .000
assistance For Un-Organized market:
Easy financing 50 3.60 1.069 3.969 .000
Genuine Spare 50 3.08 1.175 .481 .632 The perception of respondents towards Un-organized market
parts
is to have clear title, Mutual trust And Resale Value while
After Sales 50 2.54 1.216 -2.676 .010
service purchasing the used cars was significant.
Resale value 50 2.40 1.212 -3.500 .001
Certification 50 3.20 1.088 1.300 .200 The perception of respondents towards Un-organized market
fair price 50 3.64 .964 4.695 .000 is to have genuine spare parts and Negotiation while purchas-
Extension of ing the used cars was not significant.
Warranty 50 3.14 1.107 .894 .375
Free service 50 3.52 1.216 3.023 .004 Overall Consumer Perception while buying pre-owned car:
From the above table following inferences were drawn:
The perception of respondents towards upgrading driving
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the skills, desire to own car, Budget constraint and separate
perception of respondents towards Organized market is to car while purchasing the used cars was significant.
have clear title while purchasing the used cars was significant
at 5% levels. The perception of respondents towards Cheaper than new car,
Resale value, Company image, Availability of spare parts, After
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the sale services and Second car while purchasing the used cars
perception of respondents towards Organized market is to was not significant.
have Professional Assistance while purchasing the used cars
was significant at 5% levels. SUGGESTIONS
Future the study pointed out that despite being backed by a
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the strong network and brand reputation, approximately 54% of
perception of respondents towards Organized market is to respondents recommend the un-organized market for the pur-
have Easy Financing while purchasing the used cars was signif- chasing a pre-owned car because the price is negotiable. The
icant at 5% levels. organized market players should make efforts to reduce the
price and bring the price in line with the competition posed
Since P = 0.632> 0.05 test was not significant at 5% levels. by un-organized market. The organized players should create
i.e. the perception of respondents towards Organized market awareness about their quality certificate which would act as
is to have Genuine spare parts while purchasing the used cars an advantage over the un-organized players.
was not significant at 5% levels.
Un-organized market participants should make efforts to build
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the after-sales service network by collaborating with service pro-
perception of respondents towards Organized market is to vides and car repair workshop and by using relationship mar-
have After sale services while purchasing the used cars was keting techniques as they already have the buyers trust.
significant at 5% levels.
CONCLUSION
Since P = 0.001 < 0.05 test was significant at 5% levels. i.e. The pre-owned car market may be transformed into a more
the perception of respondents towards Organized market is to organized market with the advent of Indian and global car
have Resale value while purchasing the used cars was signifi- makers and other major corporate houses of India. Auto ma-
cant at 5% levels. jors not only increase their market penetration through the
pre-owned car business, but also make a profit out of this
Since P = 0.200> 0.05 test was not significant at 5% levels. venture. Unorganized pre-owned car dealers are trying to
i.e. the perception of respondents towards Organized market match the service standards of organized used car dealers to
is to have Certification while purchasing the used cars was not become more professional in their marketing approach. The
significant at 5% levels. general consensus among the industry is that the pre-owned
car segment may become almost double of the new car mar-
Since P = 0.0 < 0.05 test was significant at 5% levels. i.e. the ket in another five years as is the case in the developed coun-
perception of respondents towards Organized market is to tries.
have Fair Price while purchasing the used cars was significant
at 5% levels. SCOPE FOR FURTHER RESEARCH
The following are Scope for future research:
Since P = 0.375> 0.05 test was not significant at 5% levels. Future research can be explore on a particular brand pre-
i.e. the perception of respondents towards Organized market owned cars.

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Volume : 5 | Issue : 11 | November-2016 ISSN - 2250-1991 | IF : 5.215 | IC Value : 77.65

Research can be carried out only on un-organized market or

organized market.

Future research can be carried in various part of India.

REFERENCES
1. Lalit Mohan Kathuria and VarunSingla, The IUP Journal of Marketing Man-
agement, Vol 11, No. 2, 2012, pp. 62-76
2. “Pre-owned car market booming in India”, available at http;//www.article-
base.com/cars-articals/pre-owned-car-market-booming-in-india-407483.html.
3. “General Motors India is Aggressively Considering into Pre-owned Car Mar-
ket”, available at http;//www.autoindia.com/news/auto-news-india748.html.
(http://www.scirp.org/journal/me

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