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Size of the second hand car market in the US

market estimation market size Market sizing
New answer on Oct 17, 2023
4 Answers
1.2 k Views
Anonymous A asked on Sep 27, 2022

Dear all,

I kindly would like to learn your approach on how to solve “what is the size of the second hand car market in the US?” and the drivers for it.

Thank you.

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Content Creator
replied on Oct 17, 2023
FREE 15MIN CONSULTATION | #1 Strategy& / OW coach | >70 5* reviews |90% offers ⇨ | MENA, DE, UK

Define the market scope: Clarify whether you are referring to the entire second-hand car market or a specific segment, such as passenger cars or commercial vehicles.

Identify key variables:

  • Total population: Determine the population of the US.
  • Car ownership rate: Estimate the percentage of the population that owns a car.
  • Car replacement cycle: Determine the average frequency at which individuals replace their cars.
  • Second-hand car market share: Research and estimate the percentage of car sales that are second-hand.

Calculate the size of the second-hand car market:

  • Multiply the total population by the car ownership rate to estimate the number of car owners.
  • Multiply the number of car owners by the replacement cycle to estimate the number of cars being replaced.
  • Multiply the number of cars being replaced by the second-hand car market share to estimate the size of the second-hand car market.

Consider drivers and influencing factors:

  • Economic conditions: Assess the impact of economic factors, such as GDP growth, unemployment rates, and consumer confidence, on the demand for second-hand cars.
  • New car market: Analyze the trends in the new car market, as it can influence the availability and pricing of second-hand cars.
  • Technological advancements: Consider the impact of emerging technologies, such as electric vehicles, on the second-hand car market.

Remember, market sizing is an estimation based on available data and assumptions. It's important to validate your estimates with industry reports, market research, and expert opinions to ensure reasonableness. Good luck with your analysis!

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Content Creator
replied on Sep 30, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut


I would always recommend you to give it a shot and then post it here, this would help you the most. 

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

Furthermore, you can find a detailed market sizing (a complex one integrated into a case) in my latest case: 

Swiss manufacturer market assessment, profitability and scenarios:

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

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Content Creator
replied on Sep 28, 2022
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice!

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updated an answer on Sep 27, 2022
Bain | Roland Berger | EY-Parthenon | Mentoring Approach | 30% off first 10 sessions in May| Market Sizing | DARDEN MBA

There are many alternative ways to solve this. And you improve much more by trying by yourself than by just reading answers.  

I suggest you give it a try and then we can comment and suggest improvement opportunities.

However, I don't want to leave you without even giving a hint. I suggest you consider:

  • the number of cars in the US
  • how long does a car last (you can think about how many miles divided by miles per year… or just assume reasonable number)
  • how frequently one changes cars
  • divide between those purchased new vs. second hand
  • the different value of cars when purchased new
  • the depreciation of the cars as the years pass by


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Raj gave the best answer


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Content Creator
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