When most people think of the target market for used cars, they typically think of young people who are just starting out in life and who are looking for a cheaper alternative to a new car.
And while this is definitely a large part of the market, there are actually many other groups of people who buy used cars.
If you’re getting into the market for used cars, it’ll be important for you to understand all the segments of this target market. You need to be clear to whom you are trying to sell, and why would your ideal customer buy a used car instead of a new one.
In this article, we will take a look at some of the different groups that make up the target market for used cars and try and understand their motivations and decision-making processes as they look for a used car to buy.
Who is the Target Market for Used Cars?
The Target Market for Used Cars ranges from parents buying a car for their teenage kid, to young people just starting out, to adults who do not want to spend on a new car, to other adults who buy a used car as their second car, to retirees who want to downsize and simplify their lives.
1. Parents buying for a teenage child
Parents, when they’re buying a first car for their teenager who has just started driving, might be reluctant to buy them a brand new car. They might want to inculcate a sense of responsibility in their child by having them maintain and take care of a used car first. Buying an affordable used car will also help the parents save money in case they need to replace it soon after.
2. Young people just starting out
For young people just starting out and buying their first car, affordability is key. A new car could be out of their budget, but they might be able to afford a used car. Used cars are also a great way to learn about car maintenance and how to take care of a car before making the leap to buying a new one.
3. Adults who don’t want to spend on a new car
An adult who is looking for a car to get around in but doesn’t want to spend too much money on it will buy a used one. They might also be more interested in how well it works than what color or brand name is on the outside of their vehicle. For simply, they cannot afford a new car.
4. Adults who buy a second car
Some people buy a used car as their second car. This might be because they live in a city and keep their primary car for long drives while using their used car for city driving. Or they might keep the second car at a weekend home and only use it occasionally.
5. Retirees looking to downsize
A lot of retirees sell their big, expensive cars and buy smaller ones that are more manageable. They also tend to look for something with better gas mileage or less maintenance required.
6. Companies buying cars for a fleet
When companies buy cars for a fleet, where the car is made available to an employee as needed, they often prefer to buy used cars. This is because they can get better deals on used cars than they would on new ones, and it’s easier to manage the maintenance and repairs for a fleet of used cars which might be of identical make.
Understanding the target market for used cars: Why do they buy?
The best way to understand the target market for used cars is to understand the reasons why people buy them. What motivates them? Is it always because they have no choice? Or are there other reasons?
Here are the top reasons why some people buy used cars instead of new ones:
- Cost
- Slower Loss of Value / Better Return on Investment
- Better Resale Value
- Environmental concerns
- Preference for vintage cars
Let’s look at each of these closely.
1. Cost
The lower cost of a used car is the primary motivation why people prefer used cars to new ones. The average new car loses around 20% and 30% of its value within its first year, so the difference in price between a new and a used car can be significant. The car itself, however, does not deteriorate by as much and so there is much more value left in the car after one year than what the depreciation indicates.
2. Slower Loss of Value / Better Return on Investment
For some people, buying a used car is a better investment than buying a new one. A used car has already taken that initial depreciation hit, so the buyer can get more car for their money.
What this also means is that a used car loses its value slower than does a new one.
3. Better Resale Value
A slower loss of value means that a used car can also give a better resale value than a new one. As we’ve seen a new car loses value quickly, but a used car usually retains its value better.
So, many people buy used cars specifically because they know they will be able to sell them later on without losing as much as they would if they were to sell a car they had bought brand new.
4. Environmental Concerns
Even though great strides have been taken in improving the efficiency of new cars, many new cars are still gas guzzlers and some consumers actually prefer older, smaller models known for their efficiency rather than a new car with a larger carbon footprint.
So there is a segment of the target market for used cars that actually buys them for environmental reasons.
5. Preference for Vintage Cars
If someone prefers to buy a vintage car like a classic Mustang or a muscle car from the 70s, their only option is to buy used. Also unlike “normal” used cars which lose value, albeit slower than new cars, vintage cars could actually gain in value, making them an attractive investment.
This means people looking for a vintage or a classic car could be willing to pay more than your average used-car customer. This creates a great opportunity to segment this market based on price, and charge a small premium for vintage cars that are still in great condition.
Summary
So as you can see, there are many reasons why people might prefer to buy used cars over new ones. The Target Market for Used Cars is diverse and includes everyone from those looking for a less expensive way to get around, to retirees downsizing, to those who have environmental concerns about new cars.
Understanding the motivations of the target market for used cars is key to understanding this market, how it functions, and how best to succeed in it.
