|BMW Premium Selection vehicles sit on a dealership. (Bloomberg)|
The coming weeks ahead of the Chuseok holiday at the end of this month are the peak season for the used car market here, according to dealers.
“People want to meet their relatives in a better car even though it is secondhand. You can also find a better deal during the period,” said Im Min-kyoung, a spokesperson for SK Encar, the nation’s largest used car dealer.
She added that a new trend within the industry is the rising presence of imported car brands.
“Korean drivers get tired of their cars faster than ever recently and many of them are turning to used cars from imported car brands,” she said.
Last year, 3.3 million used cars, worth 13.5 trillion won ($12 billion), were traded here, more than double the 1.5 million new vehicles sold in the year.
And the Korean market, despite its lack of a transparent trading system, still seems to have growth potential.
For instance, SK Encar, through which about 1 million cars are traded, has recorded a 40 percent growth rate every year over the past five years.
What makes industry people more excited is the fast filtration of imported cars here.
After the car sales of foreign brands first surpassed the 100,000 mark last year, the market is widely expected to deliver 140,000 cars in 2014 and claim 15 percent of the market by 2020.
As the import car market continues to grow thanks to cheaper prices and renewed awareness among consumers, more cars are coming out for sale in the used car market.
Since foreign carmakers started sales here in 1987, around 660,000 imported vehicles are running on the road. Of them, some 400,000 are believed to have been traded in the used car market.
The remaining 260,000 cars that were registered in the past two to three years will also hit the used car market in the coming years, industry watchers say.
“With the price gap between Korean cars and imported ones narrowing, more drivers are choosing imported used cars instead of larger new Korean cars,” said Im.
“Car prices lower by 10 percent every year. The reduction rate for expansive import is bigger, translating into a better deal for potential buyers.”
For SK Encar, the best-selling models include BMW 3 Series, Audi A4, Lexus and Volkswagen ― medium-sized cars which sell secondhand for about 20-30 million won.
Carmakers are also witnessing the market potential, with some companies, especially popular brands like BMW and Mercedes-Benz, jumping into the market directly.
BMW, which sold the most cars at 23,293 units in Korea among imported car brands last year, was the first to tap into the used car market with its premium services.
BMW is the sole carmaker to resell its used cars under a global program named BMW Premium Selection.
Its Korean unit adopted the system in 2005 and sales soared in recent years. After 1,500 cars were sold last year through the BPS brand, sales are expected to reach 2,000 this year and 3,000 next year.
BPS cars are required to have a record of no accidents for five years or have a mileage of less than 120,000 kilometers before undergoing a thorough inspection by BMW engineers on 72 categories.
Park Byung-wook, marketing manager at BMW Korea, said that there could be an average of 1-2 million won price difference between BPS cars and those sold by other dealers, adding that some models have no difference in prices.
“Compared to existing shady deals for used cars here, BPS is a white market where every deal is made in a transparent way. Considering the perfect warranty offered by BMW and other benefits, the price difference may not be a big deal for consumers,” he said.
“Depending on our performance as a market leader, more carmakers are likely to consider direct operation in the used car business here.”
The market will gain more momentum as the Korea Automobile Importers and Distributors Association has recently decided to create a certified price index for used cars.
“We are carrying out a survey as part of efforts to make an index to be used by the government and insurers as well as consumers for more exact depreciation and taxation,” KAIDA executive managing director Yoon Dae-sung said at a news conference in July.
The association plans to announce a new registration system benchmarking the Kelley Blue Book, the largest automotive vehicle valuation company in the U.S. which offers pricing information of used vehicles.
By Lee Ji-yoon (firstname.lastname@example.org)