Deal check: Certified used car dealers
Prices of second-hand cars at a dealer in the organised market are always higher than anywhere else. What makes these cars so special?
The organised used car market is still small, despite being run mainly by car manufacturers. Mahindra has First Choice, Maruti has True Value and Toyota Utrust, aside from brands launched by Honda, Tata Motors, Chevrolet and Hyundai. These are multi-brand dealers, so they don’t just sell cars manufactured by their parent company. They are also always more expensive than all cars on the unorganised market, which comprises used-car dealers and individuals selling their own cars. For example, you could currently buy a Toyota Innova from a used car dealer in Mumbai for Rs9,85,000, but at Toyota’s Utrust, it will cost Rs11,00,000. Here are some more examples:
|Car||Certified dealer||Unbranded dealer|
Prices last updated in October, 2013.
So the difference can be significant. We talked to some of these dealers to find out why they were charging such a high price. Here’s what we came back with:
Brand assurance Used cars from certified dealers undergo a rigorous inspection. If there is a duplicate part, it does not go on the lot until it’s just as it should be. The car is fully refurbished. Used car dealers will also run an inspection, but it is unlikely to be as thorough. With a big purchase like a car, even if it is second-hand, it may be useful to pay a bit extra for a more rigorous check. However, if you’re confident of examining a car – with the help of a mechanic, perhaps – you may find the extra price unwarranted.
Quality checks Certified car dealers claim to adhere to the highest quality. They check if the car was involved in an accident or tampered with. Odometer readings will be checked so that you know how many more kilometers the engine can still carry on. These dealers do not accept cars old cars (7 years maximum, with Maruti True Value) or those which have had multiple owners. Similarly, Tata Motors Assured only offers cars which have clocked less than 1.2 lakh kilometers. These parameters help you in getting a better second-hand car.
Warranty and services After all the assurances, though, all used car dealers, both branded and unbranded ones, offer warranties of up to one year or 15,000 kilometers, whichever comes earlier. Give that they offer the same warranty, the premium you must pay a certified dealer will be excessive. They do offer free servicing and maintenance packages, but this benefit is small compared to the high difference in cost.
Easy loan: Banks and financiers are skeptical about financing second-hand cars. They believe that the collateral may not be good enough in case the car reveals a problem at a later stage. There’s no such problem with a multi-brand dealer in the organised market. All of them have tie-ups with banks, which will lend you the money at a lower rate than they would if you were to buy it from the unorganised market. In fact, most lenders will not entertain you if the car is older than three years unless it is from the organised market.
Our take: The reason you pay a premium at multi-brand organised dealers is the assurance of a good car. Whether or not this is worth it depends on how confident you are of getting a car (go with a mechanic, but see our guide here), whether or not you do find the car you want at an unorganised dealer, and if you need a car loan.