The financial arm of used-car retailer Cars24 will invest significantly towards enabling instant disbursals of car loans, Co-founder and Chief financial officer Ruchit Agarwal told businessline.

“Essentially, Cars24 owns the car being sold and therefore our NBFC arm practically needs to underwrite the customer, which would makes it akin to a personal loan in future. Which is why we want to enable instant disbursals of car loans super convenient for the customer. This requires massive investment in technology and underwriting capabilities, and data sciences. That’s where most of our investments will go in the months and years to come,” he added. 

In the last three years of operations, CARS24 financial arm has disbursed pre-owned car loans worth over ₹1,000 crore along with achieving net profitability. Agarwal noted that loan financing is a very lucrative business. “We were hit with Covid waves initially and so we were very conscious of who we were lending to and created stronger risk management practices. As growth came and risk was under control, and collection was also under control. This has helped us to now hit profitability. I think going forward, as we grow, financing arm will continue to add to Cars24’s bottomline,” Agarwal added.

The financing services are currently present in most of the major metropolitan areas like Bangalore, Delhi, Mumbai, Chennai, Hderabad, and Kolkata. “Our future plans is to overall scale of India business. We will penetrate deeper into the markets as we sort of scale in the years to come,” said Agarwal. 

Loan penetration

Talking about the market opportunity in used-car lending space, he noted that new cars market in India have a financing penetration of close to 80 per cent. Which means, if there are hundred new cars getting sold, 80 of them are financed through a car loan. In the case of commercial cars, this percentage further jumps to a high 96-97 per cent. 

“Interestingly, in the used-car industry, loan penetration is around 15-20 per cent. In a country like India, where even washing machines, and fridges are bought on credit, we were prompted to explore why used-cars industry did not have a similar financing penetration. Then we figured out there were some challenges that people faced and that’s why we applied for the NBFC arm,” said Agarwal. 

Today on Cars24, out of each hundred cars being sold, 50 of them are through car loans as compared to the industry average of 15 to 20 per cent. Founded in 2015, Cars24 is a global e-commerce platform for pre-owned vehicles with a presence in India, the Middle East, Australia, and Southeast Asia. Cars24 has also set up multiple Mega Refurbishment Labs. 

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