Jun 25, 2023

Used car financing market is booming, yet challenges persist

As pandemic ends, used car demand is soaring. However, there are some gaps that need to be filled.

Used car market landscape

The used car market in Indonesia is expanding rapidly post-pandemic. Buyers are favoring used cars over new ones because the pandemic has dampened people's spending power. Financiers who offer credit for used cars also contribute to the growth of the market.

As for buyers, buying a car is more than just deciding which model to get, but also deciding which financier to choose from when they opt to take out a loan, and the journey itself is an uphill battle.

Dealers as influencers

Buyers rely heavily on dealers' guidance throughout the buying process. First, they'll ask the dealer for a financier recommendation. Secondly, they prefer if dealers look after their end-to-end loan process. This means dealers need to act as middlemen.

Buyers, however, can also apply for loans independently, though this process is less favored because they'll need to do the heavy lifting. Whichever the process, the overall buying journey remains the same with the following steps:

The lingering issues

After hours of surveys and interview sessions, our research team was finally able to put together a list of recurring problems commonly faced by buyers when they’re in the process of taking out used car loan:

Buyers only get loan quotation from dealers' pre-selected financier, which most of the time isn't directly comparable.
Buyers are allowed to use other financier of their choices, but dealers will deliberately complicate the process, which eventually leads to loan rejection.
The document submission process is back and forth. It's both online and offline. So although buyers have submitted their documents online, dealers still request for their physical signatures.
The waiting game is painful. Buyers can't track their application status real time, unless they contact the dealers every now and then.

Digital sales enablement

From what we can learn from the car-buying journey above, most dealers haven't yet been equipped with digital products that can simplify their day-to-day operations, which can potentially lead to great losses for dealers and buyers alike.

With challenges that persist, it's safe to say that the industry is open to a digital disruption.

Used car financing market is booming, yet challenges persist