From Internal Combustion Engines to Electric Vehicles Decline
"Price Decline Expected Due to High Interest Rates and Other Factors"
[Asia Economy Reporter Hyunseok Yoo] Used car prices, which had formed high prices this year, are showing a downward trend. High interest rates and high inflation are acting as burdens on consumers.
According to the automotive industry on the 27th, the average used car selling prices of K Car and Lotte Rental in the third quarter were 16.92 million won and 13.73 million won, respectively, up 14.28% and 4.99% compared to the same period last year. In the previous quarter, they were 16.86 million won and 13.68 million won.
Used car prices have continuously risen this year. The biggest reason was delays in new car deliveries. Due to semiconductor supply instability and other factors, the delivery period for new cars lengthened, leading consumers to prefer used cars. As a result, there were cases where used car prices were higher than new car prices.
The soaring used car prices have recently sharply declined. According to K Car, the Grandeur IG model dropped from 20.82 million won in September to 20.80 million won in October, and to 20.30 million won this month. The hybrid model also fell from 27.61 million won to 26.70 million won during the same period.
Popular models such as sport utility vehicles (SUVs) showed similar trends. The Sorento Hybrid (4th generation) model decreased from 38.41 million won to 37.91 million won, and the Tucson Hybrid (4th generation) dropped from 34.22 million won to 32.50 million won. Notably, these two models had the same prices in September and October but fell nearly 2 million won this month.
Electric vehicles also could not avoid price declines. The Genesis G80 Electrified model fell from 76 million won in September to 74 million won this month, and Tesla’s Model Y and Model 3 also dropped from 75.67 million won and 55.39 million won to 73.67 million won and 55.06 million won, respectively.
The industry cited the 'three highs' phenomenon?high interest rates, high inflation, and high exchange rates?as reasons for the drop in used car prices. As a result, consumer sentiment has frozen, reducing demand for used cars. The recent easing of semiconductor supply and the significant increase in domestic finished car production also influenced this. Domestic finished car sales in October reached 120,580 units, a 12.6% increase compared to the same period last year.
The price decline is expected to continue. This is because the base interest rate hikes have rapidly increased rates for auto loans and other car installment financing. The base interest rate, which was 1.25% in January, rose to 3.00% in October. Consequently, auto loan products that had annual interest rates of 4-5% recently are approaching 10%, increasing the burden on consumers intending to purchase used cars.
Especially as the Bank of Korea is expected to raise the base interest rate further following the United States, auto loan interest rates are also expected to rise. A used car industry official explained, "Consumers seem to be postponing purchases due to the increased prices," adding, "The economic downturn caused by high interest rates and high oil prices has also dampened consumer sentiment."
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