[Carflation Era] Still Expensive Used Cars... Popular Models and New Cars Show 'Reversal Phenomenon'

Consumers Cautious Amid Interest Rate Hikes and Rising Fuel Prices
Popular Car Models Still Show Price Inversion Compared to New Car Prices

Seoul used car marketplace scene.
[Image source=Yonhap News]

[Asia Economy Reporter Seong Giho] Used car prices, which had risen along with new car prices during the COVID-19 period, are gradually declining. As consumers grow weary of price increases, combined with interest rate hikes and rising fuel costs, they are becoming more cautious about purchasing used cars. However, popular models remain highly sought after. The phenomenon of used car prices for nearly new and popular models being 2 to 3 million KRW higher than new models continues.

According to used car sales site K Car on the 1st, the price of a Kia Sorento 4th generation hybrid gasoline turbo 1.6 4WD Signature Gravity model, delivered in January this year and driven 12,469 km, was 48.5 million KRW. A new car with similar options costs about 45.6 million KRW, making the used car 2.9 million KRW more expensive. The waiting period for a new Sorento hybrid is about 17 to 18 months.

According to Encar.com, last month, the maximum prices of the Kia The New Carnival and The New Sorento slightly decreased, but their minimum prices rose by 1.07% and 2.91%, respectively. The Ssangyong G4 Rexton also saw a 2.67% increase in its maximum price, indicating minimal average price changes. The New Grandeur IG Hybrid, which had a relatively large price drop the previous month, rebounded with minimum and maximum prices rising by 3.61% and 2.26%, respectively.

Industry insiders expect that while used car prices will generally decline slightly, the current situation of popular models maintaining high prices will continue for the time being. Nearly new cars also remain popular. Nearly new used cars refer to the latest models delivered within one year and driven less than 10,000 km. They have ample manufacturer warranty and mileage left, offering the advantage of buying a car that is practically new at a lower price and faster.

An Encar.com representative said, "This year, due to inflationary pressures, used car prices generally showed a slight decline compared to previous years, except for some models. However, nearly new car listings are quickly sold out, and price support will continue mainly for domestic SUVs."

However, the previously soaring average used car prices are gradually stabilizing. According to Encar.com, used car prices in July fell by 1.3% for domestic cars and 1.0% for imported cars compared to the previous month. This marks three consecutive months of price declines since May. Due to the semiconductor supply shortage for vehicles, the waiting period for new cars had extended to over a year and a half, causing used car prices to surge.

Considering that used car demand usually increases before the summer vacation, a price rise was expected, but no noticeable upward trend has appeared yet. This is analyzed to be due to consumer sentiment shrinking as already highly inflated used car prices coincide with soaring fuel prices.

In particular, prices for midsize and sedan cars have noticeably dropped. Since the beginning of this month, domestic cars such as the Kia Sportage diesel fell by 3.14%, Renault Korea SM6 gasoline by 3.02%, Genesis G80 by 2.75%, and Hyundai Kona by 2.23%. Among imported cars, the Audi A6 diesel dropped by 3.47%, BMW 3 Series by 2.88%, and Mercedes-Benz C-Class by 1.76%.

Jang Moonsoo, an analyst at Hyundai Motor Securities, said, "In Korea, delays in new car deliveries are expected to continue significantly until the supply chain fully recovers. Therefore, used car prices will remain at a high level."