INTERNATIONAL JOURNAL OF INNOVATION IN ENGINEERING RESEARCH & MANAGEMENT ISSN: 2348-4918

Peer Reviewed and Refereed Journal, (EMDMSCBW- 2019)

FACTORS AFFECTING PRE-OWNED CAR PURCHASING DECISION

Dr. Deepa Katiyal

Associate Professor, Shri Vaishnav Institute of Management, Indore
Ms. Khushboo Jain
Assistant Professor, Shri Vaishnav Institute of Management, Indore

Abstract - Dealers and manufacturers are moving in the direction of aiding value to used
cars through modifying car operations and investing new technologies in them in a modified
manner before reselling them. This improves customer experiences and trust which builds
the platform for competing with private sellers and lower priced independent dealers of
brand-new cars. The present study is an attempt to know the perception of customers
towards pre-owned cars and to research the factors considered by the customers while
purchasing pre-owned cars. 110 consumers of pre-owned cars from Indore city were
researched for the study through a self-designed questionnaire. Factor analysis was applied
to study the factors considered during purchasing of pre-owned cars.
Keywords: Pre-owned cars, Brand perception, Service quality, Factor analysis.

1 INTRODUCTION
Automobiles have become one of the most profitable industry worldwide and an
indispensible part of our lives. Various automobile corporations like Nissan, Hyundai
Motors, Toyota, Suzuki and Volkswagen have now achieved expanded manufacturing
amenities due to India’s strength in engineering, fuel-efficient and cost-effective
manufacturing strategies as mentioned in New York Times reports. Though automobiles are
less important indicator of any country’s economy but for an individual the automotive
vehicles used by him as a mark of his convenience, fulfilled desires and status maintenance
acts as a measure of his development chart. Reports of Society of Indian Automobile
Manufacturers [SIAM] state that annual car sales are anticipated to attain 5 million vehicles
by end of 2015 and more than 9 million by 2020. India which stood 15th in passenger cars
in 2016 is expected to jump to the position 10 in international market by 2020.
Advancements in life style have led to the adoption of cars with a growing pace and an
emergence in the market of pre-owned cars. The used-car business has been one bright
spot in a slow growing automotive industry over the last few years. The rush to buy diesel
cars a few years ago with the prices of petrol being pegged to the open markets and then,
the sales going down on account of the inability of the customers to buy new cars led to a
visible growth in the used-car volumes. This growth was supported by the investments the
manufacturers made in growing the dealer network for used cars, branding and making it
viable for the customers to pick this option. The role of internet too cannot be undermined
as a critical growth driver in this industry. Online marketplaces and auto sites have played
a significant role in bringing the market to the consumers very effectively. A combination of
these developments made the business transparent, easy to understand, and create pricing
benchmarks making it a compelling proposition for those who could or did not want to buy
a new car. At the present time, the used car market is estimated at the same size as the
new-car market. Only a few years ago, it was thought of as a third of the new car market.
While this market has grown rapidly and has become an important part of the automotive
value chain, there is little information on the customer profile, buying patterns, business
norms, etc. In our endeavor to bring relevant insights to our clients, we researched the
sector and based on a primary survey, have come up with some interesting perspectives.

2 REVIEW OF LITERATURE
India is becoming a hub of major manufacturing industries and the automobile industry (in
specific for passenger car segment) is making rapid progress in the country. After de-
licensing of the industry in 1991, a number of global players have opened their plants in
India. The players of automobile industry are developing new strategies to increase their
market share. They do this by launching new variants in existing models and new models
targeting people who prefer cars. An important feature of this industry is that the industry
is sensitive and the choice of a brand in passenger cars varies across segments. This
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VOLUME: 06 Special Issue 08 Paper id-IJIERM-VI-VIII December 2019
 INTERNATIONAL JOURNAL OF INNOVATION IN ENGINEERING RESEARCH & MANAGEMENT ISSN: 2348-4918
Peer Reviewed and Refereed Journal, (EMDMSCBW- 2019)

research explored the choice of brand in different segments and the factors influencing the
same with weighted average ranking. The study was conducted in Chennai on
603respondents who owned a car. The impact of demographic variables on their choice
revealed that factors influencing the brand preference among the consumers who prefer
passenger cars in mid and premium segments vary, and age and income influence their
brand choice Sathyapriya (2011). Study done by John and Pragadeeswaran (2013) on
consumer preference on car in Pune investigated the impact of profile of respondent &
influencing factor on purchasing decision. They concluded that the income fluctuation,
mileage, durability and current condition of the cars are the factor driving the demand of
used cars in India. Used car sector offers immense potential as penetration of used car is
very less in city compared to population. Srivastava and Tiwari (2014) studied the buyer
behavior for A3 segment vehicles such as Honda City and SX4 in a particular region.
Customer purchase parameters considered for study were Price, Safety, Comfort, Power &
Pickup, Mileage, Max Speed, Styling, After Sales Service, Brand Name and Spare Parts
Cost. Based on above parameters and analysis made in this he revealed that, while
purchasing A3 segment car customer give much importance to brand name, seating and
driving comfort. Word of mouth publicity and advertisements in car magazines are found to
be more effective communication medium for promotion of cars.
Sangode (2011) in their research paper did a comparative study of service quality of
Maruti Suzuki and Hyundai Showrooms in Nagpur. Service quality is a fundamental aspect
of service provision and this is especially the case with motor vehicles, where substantial
profits are generated in the servicing of vehicles. The study was conducted using a
questionnaire consisting of 26 questions using a convenience sample of 40 respondents
who were the owners of Maruti and Hyundai cars. Raj (2013) conducted study to assess the
influencing factors for buyer brand preference for SUV’s and MUV’s. Product reliability,
monetary factor, trendy appeal, frequency of non- price promotions offered, trust-
worthiness and brand association were identified as the major predictors. Rajasekar and
Rameshkumar (2015) in her research found that driving comfort, availability of spare parts
and pricing were analyzed as significant influencers of buyers’ choice behavior. Buyer
demographics like age and qualification didn’t seem to influence their choice with respect to
car purchase. Shende (2013) in her study threw light on various aspects that the
manufacturers should concentrate on to attract the prospective buyers. The demand for the
small automobile segment is increasing because of the growing number of nuclear families
as well as parking problems. Hence the manufacturers should find out the needs, wants,
tastes and preferences of buyers in order to design the products. Also fuel economy and
driving comfort are the most important parameters followed by availability of spares and
their price.
Brand perception is something which start building up before a car is purchased
and goes on with it and reflects in the recommendation the customer makes to his
acquaintance for the same Shankar, S. (2016). His study also shows that the customer
might not be using a car still he holds the perception about it. Brand personality of car is
enforced by the seller in the mind-set of the customer who reacts to it by forming their
perception about the car and this reflects in overall brand image of the car. Murty,
Udayashankar and Varma (2018) looked into the feature of Brand Equity as it is believed to
enhance value endowed by the brand to the product. Although the idea of using a name or
a symbol to enhance a product’s value has been known to marketers for a long time but
brand equity has gained a renewed interest in recent years. The objectives of the study were
to analyze the importance of various factors like brand knowledge, brand preference, brand
loyalty, brand application etc. in car market in Pondicherry. The primary data was collected
from three hundred car owners through an interview schedule. From the five factors, brand
application factor has been rated as the most important factor in car industry. This study
shows that it is possible to ascertain where a company should focus its improvement efforts
in order to make it payoff.
Signatory to the World Trade Organizations, India could no longer apply quantitative
restrictions on the import of used cars. As the used cars are very inexpensive, they would
pose a serious threat to the Indian car industry. To counteract the threat, the Government
of India has built tariff and non-tariff barriers. In this study, an attempt has been made to
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VOLUME: 06 Special Issue 08 Paper id-IJIERM-VI-VIII December 2019
 INTERNATIONAL JOURNAL OF INNOVATION IN ENGINEERING RESEARCH & MANAGEMENT ISSN: 2348-4918
Peer Reviewed and Refereed Journal, (EMDMSCBW- 2019)

understand the attitude of car buyers towards the import of used cars by using information
system. The results reveal that one third of the respondents show interest in the imported
used cars. Also, it is found that the demographic factors such as age, monthly household
income and the number of earning members in the family have a significant impact on the
positive attitude towards the imported used cars.

2.1 Research Objectives

 To analyze the perception of customers toward pre-owned car.
 To determine the factors affecting pre-owned car purchasing decision in Indore.

3 RESEARCH METHODOLOGY
The present investigation is an exploratory study undertaken to know the factors affecting
pre-owned car purchasing decision. Research area selected for the study is Indore City. A
sample size of 110 consumers is taken using convenient sampling. The data for the study is
collected with the help of self-designed questionnaire. The items in the questionnaire are
related to various features of car including manufacturing year, kilometers covered, ttyre
condition, color, safety features. Apart from these other items were related to finance,
insurance and warranty. Initially reliability test was applied to analyze the reliability of
questionnaire. Further Factor Analysis was applied to find out the factors affecting pre-
owned car purchasing decision with special reference to Indore city.

3.1 Reliability Test For data reliability value of Cronbach’s Alpha value is .631 which is
greater than 0.50 which means data is reliable.
Table 1: Reliability Statistics
Cronbach's Alpha N of Items
.631 22

3.2 Factor Analysis

The result of extraction retention factor – KMO & Barllett’s Test was adopted to determine
the appropriateness of data set for factor analysis. High value (between 0.5 – 1) of KMO
indicates that the factor analysis is appropriate. In this study, the result of KMO (.620) and
Bartlett’s Test of Sphericity (.000), indicates that the data is appropriate for factor analysis.
Principle Component matrix was employed for extracting factor followed by Varimax
rotation.
Table 2: KMO and Bartlett's Test
KMO .620
Measure of Sampling Adequacy.
Bartlett's Test of Sphericity

Chi Square Value 415.054

df 231
.000
Sig.

Following are the factors that affect the pre-owned car purchasing decision
Factor 1: Condition of Car
This factor comprised of:
Kilometer covered (.723),
Year of manufacturing (.678),
Car checked by other mechanic (.579),
Condition of tyres (.589),
The total factor load comes out to be: 2.198
The above factor explained 12.920% variance.
The above factor shows that the kilometer covered by the car is the biggest factor affecting
the pre-owned car purchasing decision as compared to other variable.
Factor 2: Risk coverage
This factor comprised of:

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VOLUME: 06 Special Issue 08 Paper id-IJIERM-VI-VIII December 2019
 INTERNATIONAL JOURNAL OF INNOVATION IN ENGINEERING RESEARCH & MANAGEMENT ISSN: 2348-4918
Peer Reviewed and Refereed Journal, (EMDMSCBW- 2019)

Extended warranty (.645),

Insurance validity (.542),
Accidental repair car at lower price (.588),
The total factor load comes out to be: 2.014.
The above factor explained 9.079% variance.
The above factor shows that the extended warranty & insurance validity of a car is the
biggest factor affecting the pre-owned car purchasing decision as compared to other
variable

Factor 3: Purchasing Influence

This factor comprised of:
Friend suggestion (.737),
Color of car (.681),
Buying car from car fair (.676),
The total factor load comes out to be: 1.948.
The above factor explained 7.194% variance.
The above factor shows that the friend suggestion for a car is the important factor affecting
the pre-owned car purchasing decision as compared to other variable.

Factor 4: Facility and safety

This factor comprised of:
Safety features (.607).
Automatic transmission (.606)
Finance facility (.540).
The total factor load comes out to be: 1.272.
The above factor explained 6.102% variance.
The above factor shows that safety features of a car is the biggest factor affecting the pre-
owned car purchasing decision as compared to other variable.

4 CONCLUSIONS
Customer mostly prefers a car which is not too old and the car which has covered lesser
kilometers. However manufacturer of a car or brand of the car plays a significant role while
purchasing a pre-owned car. As Maruti Suzuki cars are considered reliable and people pay
a good amount of money to buy them. Besides the manufacturers the model of a car is also
a key element while purchasing a car and customer are very concerned about the model
and accordingly they make a decision, whether to buy a car or not. So it can be concluded
from the study that factors responsible for the selection of pre-owned cars can be present
condition of the car, the factors related to risk coverage, influencing factors for purchase
and facility and safety.

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