Used Car Industry, Ministry of Land, Infrastructure and Transport's 'Used Car Consumer Protection Measures' Impact ... Why Different Groups Use Different Calculations

*This content was translated by AI.

Regarding the 'Used Car Consumer Protection Measures' announced by the Ministry of Land, Infrastructure and Transport on the 6th, various reactions and opinions are emerging from different sectors of the used car industry. The Korea Automobile Dealers Association (KADA), the largest domestic organization representing used car dealers (Chairman Eom Tae-kwon, hereinafter KADA), expressed a supportive stance, stating that "most of the issues raised have been reflected." However, some organizations argued that the policy seems somewhat light given that it was supposed to reflect opinions from various sectors over the past few months, pointing out areas that require improvement.

The core content of the government's proposed used car consumer protection measures consists largely of four items: first, mandating the display of total costs including vehicle prices and all fees in online advertisements; second, establishing detailed guidelines for performance inspection lines; third, integrating the current performance insurance into seller insurance and strengthening sellers' warranty responsibilities by expanding refund options; and finally, setting compensation standards for diagnosis errors on "sell my car" platforms. This last measure effectively introduces a defensive right for buy dealers.

First, we sought opinions from managers of major domestic used car trading platforms regarding the mandatory display of total costs including all fees such as vehicle prices in online advertisements. For reference, the domestic used car platform market is dominated by Enca and HeyDealer, which hold near-monopoly positions in advertising and buyback segments, respectively. If these two companies independently raise their online product prices, corporate dealers or individual dealers have no other options. Enca is a foreign-owned company with Australian CarSales as its major shareholder, while HeyDealer has seen some dilution of shares due to raising funds from multiple external investors; however, the combined shareholding of its top two shareholders remains at approximately 8.08%, leaving Park Jin-u (CEO) in control of management.

Among this round of used car consumer protection measures, the 'Total Cost Display System' calls for platforms to take on a specific role. Currently, most major used car trading platforms (from the dealer's perspective, advertising platforms) already present all amounts including fees under the name "Total Cost Calculator." This system automatically calculates figures once dealers input the vehicle selling price. The Ministry of Land, Infrastructure and Transport could not have been unaware of this content during the policy formulation stage. However, according to our investigation, platform industry representatives stated they would comply with the Ministry's direction since they already possess functions equivalent to the total cost display system. Nevertheless, a used car platform official who wished to remain anonymous added further comments: "There is a high likelihood that dealers will still be left with the obligation to input all costs including amounts."

There are separate cases where calculating the total cost under the Total Cost Display System becomes complicated. This involves how to implement the mandatory total cost display in used car transactions involving financial products such as lease transfers or rentals, rather than simple used car 'purchases.' Since differences inevitably arise at the final purchase stage depending on individual creditworthiness, this increases the complexity of system development relatively more.

Regarding the integration of performance insurance into a mandatory insurance for dealers, surprisingly, the dealer industry expressed a calm stance. In particular, KADA stated, "It appears that the raised issues have been reflected, which is rather refreshing," adding, "Previously, when problems arose after selling cars, they were fixed through insurance; however, due to the nature of used cars, additional maintenance demands sometimes occurred." Thus, they showed a favorable attitude toward the new policy. However, another used car association, the National Association, did not issue a statement.

What dealers find more burdensome is the matter of contract cancellation. According to the used car consumer protection measures announced on the 6th, if major vehicle components such as the engine fail within seven days after purchase and repair costs or repair periods are excessive, consumers may cancel the sales contract.

The reason frontline used car dealers find this burdensome is not only due to resistance against contract cancellation itself but also because if a consumer uses a used car for seven days after purchase and then cancels the contract, it creates a situation indistinguishable from renting a rental car for seven days. It is difficult to determine how much to charge each vehicle model as an appropriate amount corresponding to rental costs under such used car usage.

However, some used car platforms already have programs allowing consumers to test-drive for seven days before deciding on purchase. According to platform industry officials, less than 3% of cases involve consumers purchasing a car, using it for seven days, returning it, and requesting a refund. This is because the cost of usage fees for seven days is quite significant, and dealers must also go through a re-merchandising process upon receiving the car back, leading to resolutions through multi-faceted negotiations in most cases. Another possible scenario shows that if the government's consumer protection policy proceeds as planned—reforming performance warranty insurance so that dealers are required to subscribe—the industry is reportedly considering responses such as negotiating clauses with insurers to establish defensive rights regarding contract cancellations.

Furthermore, the industry understands that measures such as establishing compensation standards for diagnosis errors on "sell my car" platforms and ensuring fair trading order in platforms are effectively targeting 'HeyDealer.' In response, major corporate representatives from Suwon and Incheon, along with both dealer associations, expressed welcoming attitudes, stating there is "nothing more to add." However, HeyDealer has not issued a statement on this matter.

In the area of strengthening the reliability of performance inspection information, there appears to be differing opinions within the performance inspection industry due to significant conflict factors such as administrative penalties for inspection errors. According to our investigation, organizations including the Diagnosis Warranty Association have not yet officially clarified their positions regarding the Ministry of Land, Infrastructure and Transport's measures. This is because the association operates under the Ministry. Additionally, given the structural setup where dealers are positioned as consumers, even if performance insurance is integrated into mandatory dealer insurance, it remains difficult to strongly criticize this arrangement, which is cited as one contributing factor.

While the used car industry agrees with the direction of the policy, it remains uncertain about the impact of its detailed contents. Particularly, platform companies that are both favorable to dealers and hold dominant market positions state that this merely involves "slight improvements to existing systems and displayed information." Dealers also note that "no new costs will be introduced in the trading process; rather, the Ministry of Land, Infrastructure and Transport itself has proposed improvements such as extending warranty periods and items while potentially lowering insurance premium burdens compared to before."

Meanwhile, the Ministry of Land, Infrastructure and Transport plans to propose amendments to relevant laws by September to ensure the swift implementation of the 'Used Car Consumer Protection Measures' and will establish a separate task force for detailed discussions on issues such as performance and condition inspections and insurance. Additionally, further industry proposals and opinions will be discussed through public forums such as symposiums. Currently, the highest probability is that the bill will begin to take effect in the market in the second half of next year.

<© STARNEWS. All rights reserved. No reproduction or redistribution allowed.>

*This content was translated by AI.