Used cars congest Indian roads

When Indian insurance executive officer K. Shankar shopped for a car, he was pleasantly surprised to discover he could buy a three-year-old SUV in near mint condition for just a bit more than a new hatchback.

"This SUV is ideal for me ... and if I can get it for the price of a much smaller new car then why not?" said Shankar.

Used car purchases are soaring in India, the world's second most populous country, as a host of global and local auto firms offer attractive trade-in deals to build customer loyalty and boost new car sales.

Many of these used vehicles are getting snapped up by people who have never owned cars before or families adding second or even third vehicles to their fleets.

With over one million cars being added to India's roads every year, experts worry the country's creaky infrastructure won't keep up with the volume of traffic, causing unbearable congestion and more traffic accidents in a country with already one of the world's worst road death tolls.

"Growth in vehicle ownership has reduced rush hour speeds of between five and 10 kilometres an hour in the central areas of major cities," the World Bank said in a recent report on India.

The number of vehicles on Indian roads has grown at an average pace of 10.2 per cent annually over the last five years, it said, adding that 50 per cent of roads were in a state of disrepair and only 30 per cent of highways had two lanes or more.

Until recently, the used car market in India was dominated by neighbourhood dealers and roadside garage mechanics who controlled nearly 90 per cent of the market, say industry experts.

But several global car makers such as Hyundai Motor, Ford Motors and General Motors have entered the market with pre-owned certified car programmes, causing used car sales to soar. India's largest vehicle maker, Tata Motors, also entered the market earlier this year.

The used car programmes allow customers to get new cars in exchange for their older ones at substantial discounts.

These used cars are then refurbished and sold with warranties.