Second hand car dealers say that the price fall will give a fillip to the second-hand market since prospective buyers of two-wheelers may now try to upgrade to second-hand four-wheelers by shelling out a little more money. "Two-wheeler manufacturers will now be forced to rethink their pricing strategies," said a dealer.Owners of the three Maruti models are, however, going to find it dificult to sell their vehicles in the second-hand market at existing prices as there may be few takers. "Prospective buyers will postpone their decisions in anticipation of prices falling further, making it a buyers' market," said a Mumbai-based second-hand car dealer.

The second-hand car market went through similar convulsions when Daewoo Motors India decided to slash the price of the Cielo by Rs 1.3 lakh in December 1997. Existing owners of the Cielo lost heavily when the value of the Cielo in the second-hand market crashed overnight.

The second-hand car market has been plummeting over the last year in view of increasing defaults by customers who bought cars through financing schemes. Salaried customers, who made purchases in anticipation of getting fancy hikes on their pay-packets, began defaulting on their loans as corporate profits took a tumble and companies turned niggardly on pay rises.

With the consequent defaults leading tohuge pile-ups of seized vehicles at the garages of auto financiers, the latter have been flogging second-hand cars at low prices to avoid being burdened with dead assets. This, in turn, has sent prices in the second-hand car market crashing.

Though the percentage of defaults has not gone up over the past few months, they still continue to rule at earlier levels, ensuring that financiers have stocks of seized vehicles in their possession at any given time. "While this is a major factor that has contributed to the crash in second-hand car prices, the entry of new models in the market will lead to a further fall in prices," said the CEO of a car finance company. "The entry of every new model further drives down the price of the previous model, even if the new car comes with few additional features over the previous one," says another second-hand car dealer. For instance, when Opel Astra launched the World Cup Edition, the value of the previous range of Astras fell by close to 15 per cent. Sample this: asecond-hand Opel Astra sells at just Rs 4.50 lakh, a discount of close to 50 per cent over the price of a new car. The Tata Sierra sells at Rs 2.20 lakh, 60 per cent below its actual price of Rs 5.5 lakh.

The strongest jolt to the second-hand car bazaar followed the high profile exposure of new cars at the Auto Expo in New Delhi in January, 1998. Altogether, three new small cars (Santro, Matiz and Indica) have hit the Indian roads during 1998.