INDIAN INSTITUTE OF MANAGEMENT

KOZHIKODE

Scientific Enquiry for Social Sciences

Project

Topic: Oranges & Lemons - A Study of Pre-owned Car

Buying Behaviour in Delhi-NCR

Submitted by:
Group 10
Abhishek Kapoor – PGP/24/126
Gundubogula Ramya – PGP/24/147
Mayank – PGP/24/159
Meghana Mallipudi – PGP/24/160
Rishav Das – PGP/24/170

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 Table of Contents

Abstract.................................................................................................................................................. 3
Introduction ........................................................................................................................................... 4
Need for Study ....................................................................................................................................... 5
Scope of The Project ............................................................................................................................. 5
Problem Statement................................................................................................................................ 5
Purpose of the Study ............................................................................................................................. 6
Management Decision Problem ........................................................................................................... 6
Research Problem ................................................................................................................................. 6
Research Questions ............................................................................................................................... 6
Research Hypothesis ............................................................................................................................. 6
Research Design .................................................................................................................................... 6
Implication of Study ............................................................................................................................. 8
Results & Findings ................................................................................................................................ 9
Hypothesis............................................................................................................................................ 10
Factors that Impact Customer’s Decision ....................................................................................... 11
Brand ................................................................................................................................................. 11
Price .................................................................................................................................................. 12
Quality............................................................................................................................................... 13
Aesthetic ........................................................................................................................................... 15
Conclusion ........................................................................................................................................... 15
Recommendations ............................................................................................................................... 16
References ............................................................................................................................................ 16
Appendix: Questionnaire ................................................................................................................... 17

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Abstract
The study of consumer behaviour is very challenging task. If a company wants to survive, it
should be able to compete well by understanding the consumer mindset. Used Car Market is a
key growth indicator in develop countries while it is an emerging automobile segment in the
developing markets like India. Generally, this market is observed w.r.t new car. A ratio
between Used Car sales & New Car sales provides the market size & opportunity for growth.
Indian economy has witnessed consistent GDP growth in last 2 decades which increased the
new car sale and total car park. Frequent launching on new models by all the OEMs and entry
of new OEMs in India has increased the used car sales and right now used car sales is 1.3
times of new car sales.
Although market is 1.3 times of new car but still there is a huge gap between demand &
supply of used cars. A famous theory given by an American economist Mr. George Akerlof is
used to describe the problem of Demand & Supply gap issue in Indian used car market. This
theory stated that the quality of goods traded in a market can degrade in the presence of
information asymmetry between buyers and sellers. In last market left with bad quality
products and then no buyer to purchase these lemons.
Each market is shifting from only Brick & Mortar platform to digital platform, presence of
many online websites like Cars24, Cardekho etc. are creating a big challenge for offline
players in India as well. Market is divided among organized, semi organized, unorganized
and customer to customer sale. Earlier unorganized players very dominating in the market
now organized players has increased their foothold.
The main purpose of this research is to understand consumers of used car market. Focus area
was to understand the impact of factors linked with Brand, Price, Quality & Aesthetic on
consumers' decision making while buying a used car. Also, it has been explained why there is
gap between demand & supply in used car market and what’s the role of opinion leader in
used car market.
The project was started with literature review and gap identification. It was found that Brand,
Price & Quality are representing very limited interest of the customer. On the other hand,
there are no of factors which are linked to these categories. Further, most of the decision-
making sub-factors related to these 4 main categories were identified. Secondary data with
results was extracted from other report & researches. To collect primary data a questionnaire
was designed, floated and it was filled by participants. 114 responses were received from
participants which was analysed on Smart PLS. The findings show that there is a positive

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relationship between Brand, Price & Quality of used car on consumer buying behaviour while
the Aesthetic criteria doesn’t impact the behaviour.
There are 14 sub-factors describing the Price, Brand, Quality & Aesthetic category of the
study. There were 4 hypotheses out of which 3 stands rejected and 1 stands not rejected. It
proves a decision is not dependent on these 3 factors but many other sub factors also co-exist.
Brand is combination of brand of the product and outlet brand both. Price factor involves
price of the car, insurance cost, maintenance cost, fuel cost and finance options. Quality is
dependent upon mileage, car condition, no of owners, age etc. While aesthetic looks like
accessory are not impacting the decision. Consumers are trying to shop at online as well as
offline stores but they are happy to sell the cars online but wants to buy only offline. It is
evident from the study that both the platform will co-exist. Online platforms are very good in
lead generation while offline stores give confidence to the actual buyer as well as seller.
Role of opinion leader is very much recognized in every decision making of a customer.
There is a rise in demand of field expert in used car space who can guide the buyers and fill
the void of limited knowledge but maximum people are still relying upon their known’s
feedback.

Introduction
This project is a small attempt to study the behaviour of used car customers in the Indian
market. The resale value of each non-consumable item matters & varies across segments like
cars are having faster resale cycle as compared to houses. Pre-Owned Car (Used Car) is an
emerging sector of the Indian Automobile Industry which is growing with a CAGR of 15%.
Earlier, used car market in Indian was majorly dominated by unorganized players like
brokers/agents. However, new start-ups and automobiles companies are now trying to
increase their foothold & want to gain the market share in used car segment to maintain their
brand value with a better resale value of their sold & running models in the marketplace.
Hence, online & offline platforms are attracting customers with their available stock
containing varieties of old car models.
But there is limited information available to decide what all factors impact the decision of a
customer who wants to buy/sell his/her car. A better understanding of the consumer mindset
would help the used car players in channel strategy development, product offering, quality
maintenance & pricing for used cars. New Car sales is very well established in India and
understood by most of the OEMs. Currently, average used car sale volume is 1.3 times of
new car sale in India and expected to be 3 to 4 folds of new car market in next 10 years. Used

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car market is at an innocent stage & fragmented customer segments at different socio-
economic levels generate the requirement of understanding the behaviour of used car
consumers as well.

Need for the study

Used car Industry is dynamic and customer evaluate the product on various parameters while
making a decision to buy/sell a Pre-owned car. If any used car player wants to take hold of
this segment of Automobile Industry, it becomes imperative to understand these factors to
strategize & gain a competitive edge.

Scope of the Project

The study aims to measure the buying/selling behaviour of the Pre-owner car buyers/sellers
along with the supply and demand gap because of price variability. This study is conducted
primarily in the Delhi/NCR region and Primary Data is collected through Online
Questionnaire.

Problem Statement
In this study, we will try to understand the leading factors impacting the used car customer’s
decisions while buying/selling a Pre-owned car. How new digital platforms are changing the
used car landscape. It has been noticed that most of the study done in past only spoke about
the Product, Price, Quality and Look are the major factors which impact the decision of used
car buyer/seller while other important factors which describe the terms of Brand, Price,
Quality and look in terms of product while channel preference, features, etc are not described
in details. How an opinion leader plays an important role in decision making.

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Purpose of the Study
The main objective of this study is to identify the leading factors which impacts the used car
customer’s decisions while buying/selling a Pre-owned car and how these factors are
influenced by external factors.

Management Decision Problem

What are the factors should businesses consider while buying/ selling cars in pre-owned car
market?
Research Problem
To determine the factors which impact the used car customer’s satisfaction while
buying/selling the pre-owned cars.
Research Questions
i. What kind of platforms does the buyer and seller prefers for the product?
ii. What are the factors that will impact the buying and selling of the vehicle?
iii. What effect does Price have on customer product choice?
iv. How much does Brand and Aesthetic impact the decision of a consumer?
v. Does quality of the product play a role in buying and maintaining the vehicle?
vi. What is the impact of an opinion leader/ reference group/ technical expert on the customer
product choice?

Research Hypothesis
H1: Brand doesn’t impact the decision of a used car buyer.
H2: Price doesn’t influence the decision of a used car customer.
H3. Quality doesn’t impact the decision of a used car buyer.
H4. Aesthetic look doesn’t play a significant role in the decision making of used car
consumers.

Research Design
Research Methodology: It is an exploratory cum descriptive research, where existing studies
and open-source data has been studied & reviewed. Subsequently, a survey-based study has
been commenced to understand & analyse the actual need of the used car consumers.
Accordingly, a questionnaire was designed & floated keeping in view the problem statement
& objectives of the study.
Sources of Data: Primary as well Secondary data has been collected for this study.

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 Primary Method: It is the method where fresh data is collected and for the first time
this happen to be original in character. In this study primary data was collected by
online google form. Primary Data was used for the study, which was collected from
the target group of young professional working in the Delhi/NCR and potential used
car buyers.
Secondary Method: Secondary Data are those which are collected from existing
database. For this study it includes appropriate material from newspapers, magazines,
Company’s Reports and open-source information from the internet.
Sampling Procedures & Sampling size: The sample or data was collected with random
sampling through online mode with the help of google form. A total of 114 responses were
received and utilized for detailed analysis. The questionnaire was prepared by using Google
Docs application. The survey is emailed to many persons via social media e-mails &
WhatsApp. Furthermore, reliability and validity have been tested by using coefficient of
"Cronbach's Alpha" which gave satisfactory results after applying it to each group and
section in the questionnaire separately and then applying it again on the entire questionnaire.
Research Instruments: Further, designed hypothesis was tested with the help of Factor
Analysis, Regression Analysis & t-testing. In the end, inferences & results were to be
established as per the data collected and analysis done.

Literature Review
“The Market of Lemons: Quality uncertainty and the Market Mechanism” a well-known
paper by economist by George Akerlof was studied which talks about a big correlation
between quality & price of a used car.
Journal Article: “Adverse Selection in the used car market evidence from purchases &
repairs patterns in the CES” studied was deep analysis of Market of Lemons study
representing how various parts of a cars impact the quality & value of a car.
Journal Article: “Purchasing a used car using Multiple Criteria Decision Making” {The
Mathematics Teacher Vol.101, No.2}, talks about the 4 major factors Total Cost, Condition,
Accessories & Aesthetics. This Article added two new factors Accessories & Aesthetics in
1st reviewed literature.
Indian Blue Book: A detailed Market Report (2019) by Mahindra First Choice on Indian used
car market.
JM Financial Report (2019): A report on used car market was reviewed to understand the
current market conditions and this segment is evolving.

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A report published by McKinsey as McKinsey Center for Future Mobility: Used cars, new
platforms: Accelerating sales in a digitally disrupted market was studied to evolving US used
car market.
Gap Identification: In Literature survey it has been found that Supply & Demand exist in the
Indian Used Car Market where possible reasons are Price, Quality & Brand. But it is not clear
why a seller holding quality car is not able to sell.
There is need to search is there any other reason which may impact the used car transaction
and what are the attributes of Price, Quality & Brand.

Implication of Study
a) Managerial
It would help the working professionals to understand the leading factors impacting a
decision of used car buyer/seller. How they can make a strategy for better conversion
of the enquiries/leads they are getting. How the gap of supply & demand can be
minimized.
b) Dealership
Dealership can reduce the inventory by understanding the demand & supply gap
issue. Leading factors which can give them better conversion of the leads they are
getting and how can they manage the inventory of used car and meet the demand of
POC consumers.
c) Consumer
Consumer can understand, what are the important factors which need to be considered
while making a decision of used car Buying/Selling.
d) Organisation
An organization can develop a strategy keeping in view the competition’s move and
consumer preferences. Preference of Offline & Online platform depicting the need of
offline vs online platforms.

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Results & Findings

Figure 1: rho_A

Figure 2: Path Coefficients & Cronbach Alpha

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Construct Reliability & Validity
Cronbach’s Alpha Rho_A Composite Average Variance
Reliability Extracted (AVE)
Aesthetics 0.690 0.690 0.866 0.764
Brand 0.750 0.828 0.866 0.795
Buying 1.000 1.000 1.000 1.000
Price 0.866 0.893 0.904 0.656
Quality 0.901 0.931 0.926 0.716
F-square Values
Buying
Aesthetics 0.002
Brand 0.847
Buying
Price 0.211
Quality 0.062

Limitations of the Study

As, the data being collected is secondary in nature it could be outdated and having details for
various part of the country. Primary data was also collected from limited no. people who are
living in majorly Delhi/NCR region.

Hypothesis
H1: Brand doesn’t impact the decision of a used car buyer.
It has been established from the above results & findings that Brand has a positive relation
with the Buying Decision of the customer. Hence, the hypothesis claiming Brand doesn’t
impact the decision of a used car buyer stands rejected.
H2: Price doesn’t influence the decision of a used car customer.
It has been established from the above results & findings that Pricing has a positive relation
with the Buying Decision of the customer. Hence, the hypothesis claiming Price doesn’t
impact the decision of a used car buyer stands rejected.
H3. Quality doesn’t impact the decision of a used car buyer.
It has been established from the above results & findings that Quality has a positive relation
with the Buying Decision of the customer. Hence, the hypothesis claiming Quality doesn’t
impact the decision of a used car buyer stands rejected.
H4. Aesthetic look doesn’t play a significant role in decision making of used car
consumer.

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It has been established from the above results & findings that Aesthetic doesn’t have a
positive relation with the Buying Decision of the customer. Hence, the hypothesis claiming
Aesthetic doesn’t impact the decision of a used car buyer is not rejected.

Brand Related Factors that Impacts the Customer’s Decision

A brand represents the entire picture captured in the mind and soul of consumers and as such,
brands are revered as important assets as far as individuals, organizations or companies are
concerned. “Coca Cola, Pepsi” brands are generating huge revenue based on revenue.
Other than Digital Platforms and Bricks & Mortar concept the valuable thing for a company
is Brand. A brand is a name, symbol, or any feature that identifies one seller’s good or service
as distinct from those of other sellers. As we understood from the earlier analysis that
preferred platform for used car buying is offline where organized and unorganized players are
dominating.
Hence, Brand plays a vital role while making the decision for car buying, same is evident
from the analysis where Cronbach Alpha is more than 0.5 and p test value is less 0.05, It has
rejected the null hypothesis that Brand is not a key factor in decision making of used car
customer.
Here, Brand consists two factors:
1. Brand of the car
2. Outlet Brand

It has been observed that Brand of the car is not a single factor that would impact the decision
of the consumer. Brand of the product and brand of the sale outlet both would influence the
decision of the used car buyers.
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The study outcomes have reflected that both the factors have a positive relation with the
overall brand factor. Organized used car players have understood this concept as each used
car is a unique product hence brand value can be created with outlet experience and delightful
customer journey. Mahindra First Choice and True Value has made their nationwide presence
with used car outlets and strong brand building has been done through these outlets.
In addition to that OEMs have started offering certified products for their brands in tune to
the US used car company CarMAX’s business model which had differentiate itself with
certified vehicles.

Price Related Factors Which Impact the Decision

Price is a wide term in case of used products especially when someone is planning to buy a
used car. It involves various factors which help in deciding the cost of ownership of a product
that makes the right price for the product.
In our study the important pricing factor are:
1. Cost of the car: Each product has life and depreciates with time because of which its
price/cost gets lower with passing time. In the case of used cars, a deprecated price becomes
the real price for buyers & sellers. It’s the basic cost features on the basis of which a
consumer decides his next step. If a buyer feels the used car, he wants to buy is having
features and quality as per his need & requirement he is ready to pay for that.
2. Fuel type: Cost of ownership depends on fuel variant as Diesel engines have better
mileage than Petrol/CNG other hand Price for the Diesel & CNG is lower as compared to
Petrol. But, the maintenance cost of Petrol vehicles is lower from Diesel & CNG cars.
3. Finance options: Automobile is an industry which has grown with the help of easy
financing & Loan options. Used car segment is deprived of the fruitful results of this facility.
Financing is just 17% in used car industry where it has captured 75% of new car sales.

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The analysis results have reflected that this factor has not a strong correlation with the buying
decision of a customer.
4. Service & Maintenance cost:
The next ownership cost after fuel is service and maintenance cost. Buyer considers it a
leading factor while purchasing a used car. Older the product higher the cost hence lowers the
demand.
Indian Blue book studied have observed that younger car has higher demand in comparison to
older cars.

5. Insurance renewal cost: Yearly cost of insurance renewal is a factor which influences the
decision.
This study has revealed that out of these 5 factors except one (Financial options) all others are
having a positive correlation with the pricing factors.

Quality Related Factors which impact the Decision

Quality has been defined as fitness for use, or the extent to which a product is successfully
serving the needs of consumers. Customer service is one of the processes that organizations
performing companies given the growing competition and to attract entrepreneurial
opportunities to improve profitability and better access to markets and increase customer
satisfaction and loyalty levels.
For a used car quality depends on various factors which are:
1. Mileage: This is the basic quality parameter which each of the buyers asks while buying a
used car. Higher mileage means greater usage of the vehicle. It means depreciation will be on
higher side hence ownership cost will be higher in due course of time. Results and findings
have revealed that it has a strong correlation with quality. Mileage is an important factor
when buying a used car, but it is easy to overlook. You can get swept away in best mpg cars,

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or other measures of efficiency. Low or high mileage affects the value of the car at purchase
and sale, as well as likely cost of maintenance and servicing. The average annual mileage is
12,000, so if a car has mileage somewhat less than 60,000 after five years it would be
considered low. If it's much more, it would be classed as high.
The below given model is the easiest model for value depreciation of a car on the basis of
mileage. A 20% reduction in current price happens with each band change.
2. Condition of the car: Mechanical and physical conditions are the next two key factors
which are visible and describe the condition of a car. Accidental, repaint, unwanted noise,
issue in driving indicates the poor condition of the car. Sometimes customer himself
recognizes and it or take advise from any expert. The condition of the car makes a great
difference to the car’s valuation. Generally, a car’s condition is defined as normal, good and
best. Customer can demand a decent amount if look of the car is giving an appeal and
technically it’s not showing any abnormality. In general, it also gives an idea about how the
car’s been driven and taken care of. Good upkeep of the car attracts the buyers and gives a
signal that car was in right hands and taken care in right manner.
3. Year of Manufacturing (Age): Life of the car is defined in most of the country after
which it gets scrapped. However, in India, it is not clearly defined at which stage vehicles
need to be scrapped. Age and mileage of the car are the biggest reasons behind the demand &
supply gap. A car that is about to end its life on paper may get extension from a competent
authority. But if they declare it unfit same can’t be ply on road and doesn’t matter what was
the odometer reading or car’s condition.
Unless the government comes up with measures that can practically access each car’s
condition and provide fitness certificates accordingly, cars that have aged on paper will
continue to get scrapped regardless of their actual condition. It’s one of the biggest factors
that affect the valuation price.
4. Nos of previous owners: Age of the car & no of previous owners are directly linked hence
lesser no of previous owners lower the risk & maintenance cost. It believes that single-
handedly driven car always better for buying. Buyers most of the time search for single
owner vehicle. There are several reasons why first owner car is always remaining the top
priority of the used car buyers. Some of them are:
➢ Consistent maintenance and driving history.

➢ Easy to find link with single owner because he purchased the new car and less risk of
financial liabilities.

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5. State of registration: Generally, buyer has first preference to buy a car of his home state
or the state where he is going to drive it. A state other than that would create the issue of
NOC from RTO and other documentation requirement at the time of name change and resale.
In a single state this work is hassle free while form one state to another it creates major
problems.
However, Indian Government has launched VAHAAN 4 to integrate all state RTOs for
smooth & transparent documents verification & ownership transfer.

Aesthetic Look Related Factors Which Impact the Decision

How a car look & gives feel is next big criteria but it seems this is a decision-making factor
in case of a New Car. On the other Aesthetic look are not that much important as quality &
pricing area,
1. Colour is all about the trend, it might be in trend when the same new model of the car was
launched and in used car repaint occurs due to minor scratches and post collisions. The colour
of car may have a positive or negative impact on its resale value.

2. The next thing is customization and personalize effects like Music System, special lights
etc. would not create a healthy impression on buyer i.e., he would not pay something
additional.

Conclusion
In an evolving market & reducing car ownership cycle, a buyer & a seller are looking for a
reliable, safe & convenient mode of transaction for used car. But, earlier only seller was
aware of the product quality and relative pricing. Now, buyers are also aware & enhancing
their product related knowledge through online pricing tools and details available at offline
stores/online public domain.
The 4 main factors like Brand, Price, Quality & Aesthetic are having many other sub-factors
that impact the buying decision of a used car buyer.
A seller is more confident on online platform while buyer is believing he will get better
product from a brick & mortar store
Opinion leaders are gaining the confidence of the customers and becoming a need of the
organized market.

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Recommendations
1. There is a need to understand the buying behaviour & preferences of customers in a
particular country regarding the used products.
2. Various factors influence the decision of a used car seller/buyer. All the factors need to
consider while dealing with the used car segment.
3. Digital Platform and Brick & Mortar concept will co-exist because every product is unique
and having a different set of features. In this scenario physical evidence with touch & feel of
the product matter a lot.
4. Opinion leaders like technical experts are need of the time to educate the customer. This
professional service is still very limited in country and having scope to rise further. So, new
start-ups and existing players can plan & strategize upon this need of the market.

References
Government Publication
References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP),
Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile
Manufacturers (SIAM), Union Budget 2015-16, Union Budget 2017-18
Exchange Rate Used: INR 1 = US$ 0.0139 as of FY19
http://www.siamindia.com/statistics.aspx?mpgid=8&pgidtrail=14

Journal Paper
https://pdfs.semanticscholar.org/0684/c0572fc4f14282cfb6596d771c20740d9f53.pdf
https://www.theseus.fi/bitstream/handle/10024/75933/THESIS%20-
BABA.pdf?sequence=1&isAllowed=y

Article in a Newspaper
https://www.businesswire.com/news/home/20180906005803/en/Global-Car-Market-2018-2022-Key-
Insights-Forecasts

Online Websites:
https://cars.lovetoknow.com/History_of_the_Automobile_Industry
https://www.ibef.org/industry/india-automobiles.aspx
https://www.ibef.org/industry/india-automobiles.aspx
worldmeterinfo, icec360survey (11% having car in india and 36% bikes in 2016)
https://www.statista.com/statistics/244861/number-of-used-cars-sold-in-china/
https://rmsautomotive.com/vehicle-remarketing-news-and-articles/7-compound-annual-growth-likely-
in-global-used-car-market/
https://rmsautomotive.eu/used-car-market-to-be-uk-automotive-industrys-growth-generator-in-2019/
https://rmsautomotive.eu/used-car-market-becoming-more-complex-and-volatile-says-cap-hpi/
https://rmsautomotive.eu/change-ahead-in-indias-complex-used-car-market/
https://www.am-online.com/opinion/2019/02/20/has-the-uk-used-car-market-undergone-a-seismic-
shift-guest-opinion
https://www.researchgate.net/publication/301753990_The_Impact_of_Pricing_on_Consumer_Buying
_Behavior_in_Saudi_Arabia_Al-hassa_Case_Study/link/5725bf9308aee491cb3aa505/download

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 Annexure: Questionnaire

1. Gender
2. What is the average monthly income of your household?
3. Do you have a car?
4. If Owned Car, which Brand/Make do you have?
5. If you want to sell this car, where would you prefer to sell it?
6. If you want a buy a used car, where would you go to buy?
7. What factor you would consider to buy used car?
8. When you are making the decision of used car buying following factors would be
critical from Brand point of view [Brand/Make of vehicle]
9. When you are making the decision of used car buying following factors would be
critical from Brand point of view [Your Past Experience (Already Owned Vehicle)]
10. When you are making the decision of used car buying following factors would be
critical from Brand point of view [Experience at Showroom/Physical visit to Setup]
11. What will be the duration of Your Usage of Pre-Owned Car (If buy/Owned)?

Please indicate your level of agreement with following factors which play a vital role at
the time of used car buying [Price]
12. Please indicate your level of agreement with following factors which play a vital role
at the time of used car buying [Fuel Type (Petrol/CNG/Diesel)]
13. Please indicate your level of agreement with following factors which play a vital role
at the time of used car buying [Availability of Finance/Loan options]
14. Please indicate your level of agreement with following factors which play a vital role
at the time of used car buying [Service & Maintenance Cost]
15. Please indicate your level of agreement with following factors which play a vital role
at the time of used car buying [Your Experience]
16. Quality parameters indicated below would impact the decision of used car buying
[Mileage of Vehicle]
17. Quality parameters indicated below would impact the decision of used car buying
[Overcall Condition of Vehicle]
18. Quality parameters indicated below would impact the decision of used car buying
[Year of Manufacturing]
19. Quality parameters indicated below would impact the decision of used car buying
[Number of Previous Owner]
20. Quality parameters indicated below would impact the decision of used car buying
[State of Registration]
21. Following factors would be important from the aesthetic look point of view at the
time of used car buying [Colour]
22. Following factors would be important from the aesthetic look point of view at the
time of used car buying [Accessories (Seat Cover, Music System etc)]

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