Second-Hand Car Market in Indonesia - High Demand for Used Vehicles

Those who follow our monthly reports will know that sales of new cars in Indonesia have been contracting ever since mid-2023. This structural contraction exposes some underlying problems, such as (generally) weakened purchasing power of the Indonesian population in combination with the higher (wholesale and retail) car prices. The latter is particularly caused by (1) the weaker rupiah (which makes imports of car components more expensive), and (2) the high interest rate environment of Bank Indonesia. Considering around 70-80 percent of new car sales in Indonesia are financed through loans, interest rates matter a lot (only recently, Bank Indonesia started to cut its benchmark interest rate).

The Institute for Research on Economics and Society, under the faculty of Economics and Business at the University of Indonesia (abbreviated as LPEM FEB UI) recently released some interesting data about the second-hand car market of Indonesia. Based on these data, a total of 1.8 million second-hand cars were sold in Indonesia in 2024, which is almost twice the number of new cars that were sold in that same year. And so, second-hand cars dominate the car market in Indonesia.

The domination of used cars is actually not something new. For many years, more used vehicles are sold than brand new ones (even though it is somewhat complicated to get good data because sales of used cars are not always adequately recorded). The main reason behind higher sales of used vehicles is that second-hand cars are a cost-effective option with lower values due to depreciation of the car, estimated at 50 percent after five years. And so, it is more affordable in a country where (near) poverty remains rife.

Still, we did see a decline in demand for second-hand cars over the years. For example, if we take a look at 2019, we see that more than 2.5 million used cars were sold in Indonesia. This is around 700,000 more units than in 2024. That is a significant decline, and suggests that -indeed- purchasing power has weakened. Moreover, when sales and production of new cars contract amid contracting sales of new cars (and the COVID-19 crisis that disrupted society in 2020-2021), then it is only 'natural' that sales of used cars will decline in subsequent years.

Serba Mulia Group Commissioner Jodjana Jody stated that among the reasons why used cars are an attractive alternative for Indonesians is that retail prices of new cars rise by an average of 3 percent per year, in addition to increasing taxes. Moreover, he said that tax rates on new cars rise faster than people's income growth, and thus new cars become increasingly unaffordable in Indonesia. Jody estimates that there are around 18 million used cars in use on the streets of Indonesia.

What has also helped to thrive the second-hand car industry is that there have emerged reliable companies that buy used cars and sell these cars to customers. These companies have the knowledge to check whether all car components are in good condition. This makes it significantly less risky for consumers to buy a used car.

Market drivers of second-hand cars in Indonesia:

• Affordability (compared to new cars);
• Growing urbanization (including demand for ride-hailing servics);
• Technological development, such as the increasing availability of online platforms and e-commerce that make it easier and more convenient to buy and sell used cars;
• Presence of reliable companies that check the quality of used cars;
• Indonesia's still low per capita car ownership ratio.

Sales and Production of New Cars in Indonesia:

	2020	2021	2022	2023	2024	2025   Jan-Jul
Car Sales (car units)	578,327	863,348	1,013,891	998,059	889,680	453,278
Car Production (car units)	690,150	1,003,561	1,330,238	1,395,717	1,196,664	658,821

	2014	2015	2016	2017	2018	2019
Car Sales (car units)	1,208,019	1,013,291	1,061,859	1,079,886	1,152,641	1,043,017
Car Production (car units)	1,298,532	1,098,780	1,177,797	1,216,615	1,343,714	1,286,848

	2009	2010	2011	2012	2013	2014
Car Sales (car units)	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019
Car Production (car units)	n.a.	n.a.	n.a.	n.a.	1,208,211	1,298,532

^{Source: Gaikindo}

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