[르포] Frozen used car market… Cars waiting for owners

The used car market is full of chills. Consumers who were considering purchasing stopped walking, and the sales floor is lined with items for sale that have not met the owner. According to the Kaizuyu Data Research Institute, which synthesizes vehicle registration information from the Ministry of Land, Infrastructure and Transport, the cumulative used car inventory last year was 149,707 units, a 135% increase from the previous year’s 63,840 units. It is a figure that makes the frozen used car market feel real. I visited a used car sales complex in Incheon and looked at the atmosphere of the site.

The cause of the cold used car market is ‘high interest rates’… Lots of store stock

The background of the cold used car market is the continuing high interest rate trend. The used car market has a structure that has no choice but to take a direct hit from high interest rates. Usually, dealers bring short-term funds through capital companies to purchase used cars for sale. Consumers who go out to purchase used cars also purchase vehicles in installments rather than paying in cash. In other words, when consumers who felt the burden of high installment interest due to high interest rates gave up their intention to buy, a vicious circle was formed in which money was not circulated to dealers and they could not finance the purchase of a car. The longer the period of non-sale of the sale, which was attracted by short-term funds, the more the interest burden falls on the dealer.

According to the credit finance industry, the inventory finance interest rate that traders borrow from capital companies has nearly doubled over the past year to 12-14% per year, and the used car installment interest rate that consumers use when purchasing a vehicle has also increased from the previous 3-5% range. It soared to the 7-15% range.

zoom inIncheon M Park Hub used car dealership. Source = IT Donga

On the 18th, the Incheon M Park Hub used car market was also lined with vehicles in stock. The market, which would normally be full of consumers considering buying a car before the holiday, is quiet. What is the market situation like for real dealers? We met Lim Tae-hyeon, CEO of ING, a resident company at M Park Hub in Incheon.

zoom inIm Tae-hyun, CEO of ING, a resident company in Incheon M Park Hub. Source = IT Donga

“It is clear that the current market situation is not good. I felt the impact of high interest rates from the second half of last year.” Since there are very few consumers who purchase used cars in full cash, the higher the interest rate is maintained, the more used cars are not sold.” He said, “The sale price of the Porter 2, one of the most preferred models in the used car market, was 23.5 million won a year ago, but now it has fallen to 20.5 million won.”

Im Tae-hyeon, CEO of ING, looking at the vehicle. Source = IT Donga

The view that now is the right time to buy a used car

It is rumored that even in a situation where used car transactions have plummeted, there are not a few cases in which consumers who have been watching for a long time make a purchase.

Representative Lim Tae-hyun said, “There are consumers who see that now is the right time to buy when the price of a used car has gone down,” and added, “For buyers who need a mid-size truck to make a living, they cannot get the car right away due to a delay in the delivery of a new car, so they look for a used car whose price has gone down. In addition, in the case of large luxury vehicles, the depreciation is high, so consumers who have been thinking about it decide to purchase and sign a contract.”

In addition, newcomers who need a vehicle for commuting but cannot afford to purchase a vehicle with full cash, novice drivers who are burdened with driving a new car, and housewives who need a second car for their children to go to school are starting to purchase used cars at a reasonable price, he added. .

Another factor that is expected to rebound in the used car market is the support measures offered by the central and local governments.

For example, at the end of last year, Uiryeong-gun, Gyeongsangnam-do, selected 50 people belonging to households with a standard median income of 180% or less among local residents aged 18 to 49 years old and implemented a used car purchase cost support project. It is a method of supporting 1.5 million won in Uiryeong Love gift certificates to local residents who purchase a used car worth less than 15 million won and pay the driving and registration tax in the jurisdiction. Due to the great response to the support project for the purchase of used cars, which was the first in the country, Uiryeong-gun extended the application for support.

From March of this year, the obligation to purchase public bonds is exempted when new or relocated small cars with a capacity of less than 1600cc are registered. Until last year, when purchasing a new or used car, it was mandatory to purchase regional development bonds (all cities and provinces except Seoul) and urban railway bonds (Seoul, Daegu, Busan) up to 20% of the vehicle price excluding value-added tax. From March of this year, the obligation to purchase public bonds for compact cars will disappear, which is expected to ease the burden on those considering purchasing them.

Pilsoo Kim, a professor at Daelim University’s Future Automotive Department, said, “Due to the used car market situation, some dealerships are announcing closures. There is also a prospect that the high interest rate trend will continue into the second half of the year,” he said.

Reporter Kim Dong-jin specialized in Donga.com IT (kdj@itdonga.com)