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Escrow’s safety net ensures a smooth ride in the used car market

    Purchasing a car – new or used – is a matter of considerable effort and expense. After having gone through weeks of deliberation on which car to buy and from where, all you seek is a smooth purchase process and a car that performs well. It can happen if you make a safe purchase.

    The market for used cars in countries such as India is predominantly led by unorganised and emerging dealers or individuals, both of which lack a track record of proven credibility. Such sellers are only expected to grow and make maximum sales in the market that is estimated to grow at 15% per year for the next few years, making it a multibillion-dollar industry.

    Several issues may arise in this process that may not be common in the purchase of a new vehicle from an authorised dealer. While purchasing second-hand cars is a growing trend with the younger generation, the scams and obstacles in purchasing a used vehicle are growing by leaps and bounds as well. There are many authorised dealership services for used cars that carry out the process in a structured and professional manner. However, a vast proportion of the used car purchases happen between individuals who, most likely, do not know each other.

    Vehicles involved in accident cases, cars that have been flooded, damaged vehicles, tampered vehicles that break down at a later point, buyers who make an incomplete payment…the list of woes that buyers and sellers face in the used car market seems endless.

    Ensuring transparency regarding the condition of the vehicle, clarifying payment of registration costs, and going through all the required documents associated with the vehicle are pertinent in a used vehicle deal. Running these checks also safeguard the buyer from landing up with a ‘lemon’ (a widely used term in the used car market which refers to a car that is not as good as the seller has promised it to be at first – in other words, it is a lemon).

    The problem of lemons cannot be emphasised enough, considering statistics of pre-owned cars sold in the market are at staggering millions (close to 4 million used cars were sold in 2018 itself). While 2019 saw a bit of a slowdown in the new car market, sales in the used car segment remained robust. With so many used cars exchanging hands every year, if sellers start hiding information about the condition of the cars sold from buyers, it certainly is a matter of concern.

    There have been numerous instances where the condition of the vehicle was not clearly communicated. Additionally, there could be some discrepancy in the vehicles’ documents. The final payment made may not be as per the initial agreement. Therefore, besides the buyer getting an expert opinion on the condition of the vehicle and its parts, having precise terms and conditions in place for the buyer and seller to agree upon is also extremely important for a smooth process.

    These are necessary but insufficient steps. It has been observed that these steps can set up the agreement between the buyer and seller but certainly cannot ensure that they abide by the terms of the agreement. Hence, the need for escrow. Once again, escrow is the solution that has come to the rescue of both buyers and sellers; it eliminates (or at least significantly reduces) the possibility of fraud in the used car market.

    Using a payment platform powered by escrow is in the best interest of buyers and sellers. A safe third-party that holds the payment for a stipulated period, escrow extends credibility to both – the buyer and seller – to facilitate a good deal. Sellers also face issues of incomplete payments and buyers with non-serious intent; Escrow is a protection tool for them as it filters through serious buyers and verifies them online before putting them in touch with sellers. The seller with an escrow account, therefore, can be assured of being presented with serious verified buyers only.

    The seller is also assured of being given the complete payment as was agreed upon, which the buyer can disburse upon receiving the vehicle in the promised condition with the necessary documents. Escrow, can, thus, provide both buyers and sellers peace of mind while also fuel safe and secure purchases in the used vehicle sector; in other words, it can guarantee the much-needed smooth ride for everyone.