Last Year, 54.7% of Used Car Transactions Were Direct Deals Between Parties... "Reflecting Distrust in Dealers"

Jeong Manki KAMA Chairman "Consumer Trust Must Be Gained Through Market Participation of Automakers and Quality Assurance of Used Cars"

[Asia Economy Reporter Ki-min Lee] More than half of the used car transactions in South Korea last year were conducted directly between the parties involved.

The Korea Automobile Manufacturers Association (KAMA) announced this on the 25th in its report titled "2020 Analysis and Implications of Domestic Used Car Transactions," which analyzed the current status and characteristics of the domestic used car market.

According to the report, the total number of used cars finally traded in the domestic market last year was 2,515,000 units, a 5.3% increase compared to the previous year. This is 1.32 times the size of the new car market (1,905,000 units).

Final used car transactions are divided into direct transactions between parties and transactions through dealers. Last year, direct transactions between parties accounted for 1,376,000 units, or 54.7% of total transactions, while transactions through dealers accounted for 1,139,000 units, or 45.3%. This is an unusual figure compared to major countries such as the United States and Germany, where the share of private direct used car transactions is around 30%.

KAMA explained that the average final transaction price of used cars is much higher when conducted through dealers than in direct transactions, indicating that consumers still tend to avoid transactions through dealers.

Last year, the average price for direct transactions was 6,046,000 KRW, whereas the price through dealers was 11,269,000 KRW, showing that dealer transactions were 1.86 times higher than direct transactions. Even for the same model and conditions, dealer transaction prices were 1.26 to 1.35 times higher than direct transactions.

It was pointed out that a virtuous cycle should be established to secure competitiveness in the used car market and expand the market share of new cars by alleviating consumer anxiety about used car transactions through vehicle performance inspections and free warranties, similar to the certified used car system for imported cars.

In fact, while the growth of domestic car transactions in the used car market has stagnated, transactions of imported cars have been rapidly increasing. Over the past three years, the market share of domestic cars in the used car market has decreased from 88.0% in 2018 to 85.8% last year, while imported cars have increased by 1 percentage point each year.

Jung Man-ki, Chairman of KAMA, stated, "In our used car market, the fact that direct transactions account for 55%, unlike foreign countries due to dual pricing, reflects consumer distrust of this market. Prompt participation of automakers in the used car market and certification activities that lead to inspections, parts replacement, and free warranties should guarantee used car quality commensurate with consumers' payments, thereby enhancing market trust and serving as an opportunity to improve the competitiveness of our automobile industry."

This content was produced with the assistance of AI translation services.