Initiatives to shift responsibility for used car performance warranty premiums from inspection providers to used car dealers

*This content was translated by AI.

A recent amendment by the Ministry of Land, Infrastructure and Transport (MOLIT), which proposes that used car sellers bear the cost of the used car performance inspection insurance paid alongside vehicle purchases, has emerged as a key issue in the used car industry. According to our newspaper's investigation, MOLIT is preparing to revise the liability insurance for used car performance and condition inspections.

The purpose of MOLIT's revision to the used car performance and condition inspection liability insurance is clear: to require dealers, rather than consumers, to pay the performance inspection insurance premium at the time of purchase. Under the current structure, a dealer-owned used car is inspected by an inspection provider, and the consumer pays the warranty insurance premium for that inspection. If a problem arises within one month and 1,000 kilometers after purchasing a used car, the consumer can resolve the issue through the warranty insurance subscribed to by the inspection provider.

The problem is that little has changed since the implementation of the used car performance inspection insurance system established in October 2017. In reality, numerous inspection centers are typically located around used car complexes. While some dealerships have exclusive contracts with specific inspection providers, most used car dealers can choose their own inspection center. Inspection centers rely on dealers to bring them a high volume of vehicles to generate revenue; however, if inspections are conducted too strictly, dealers may stop bringing cars in.

This is why inspection providers cannot afford to ignore the preferences of dealers. Furthermore, after a used car is sold and repairs are made using the subscribed performance warranty insurance, resulting in claim payouts, they face pressure from insurance companies to improve loss ratios by factoring in premium increases. They find themselves caught between dealers and insurance companies.

Some have pointed out that there were harmful practices where temporary measures were taken for breakdowns before sale, with issues later resolved through performance warranty insurance. This is particularly problematic because the use of performance warranty insurance requires a condition of being within one month; consequently, many consumers discovered vehicle defects after this period had passed. However, it remains unclear to what extent the revision of the performance and condition inspection liability insurance will bring about changes.

During our investigation, industry officials we met expressed divided reactions regarding MOLIT's attempt to revise the used car performance and condition inspection liability insurance, with some supporting and others opposing it. Even opinions differ between the Korea Used Car Dealers Association and the National Used Car Dealers Association. A dealer in Suwon stated, "From a dealer's perspective, it is only common sense for the dealer to directly purchase performance warranty insurance to signify that there are no issues with the performance of the car they are selling." Meanwhile, a dealership representative from Incheon with extensive experience added regarding the used car performance inspection revision, "Having an independent third party objectively diagnose vehicle conditions is like someone who knows nothing about the field talking nonsense." However, a dealer opposing the change argued, "The problem lies in consumers paying the insurance premium," and suggested that "it would be ideal for the inspection provider who examined the car to share the cost."

Divided opinions on used car performance warranty insurance have long been a contentious issue within this industry. Nevertheless, the purpose of MOLIT's attempt to revise the used car performance and condition inspection liability insurance is not significantly different from the goal that "the seller must resolve issues." Most used car dealers we met during our investigation stated, "If the trust in the used car market can be restored, dealers can bear the cost of the used car performance and condition inspection liability insurance." Major brands, including Hyundai Motor Group, are largely entering the certified pre-owned vehicle business. Therefore, this is a time when general used car dealerships and individual dealers must make new attempts to compete with them. This is why there is hope that MOLIT's amendment on the used car performance and condition inspection liability insurance will contribute to the development of the used car market in some way.

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*This content was translated by AI.