September 09, 2015 07:54
Buyers of second-hand cars who want to be smart in a burgeoning market should find out which models are popular for resale and take depreciation into account.
The value of a car drops from the point when it was new. If it cost W10 million and sells for W7 million second-hand, the depreciation rate is 30 percent (US$1=W1,200).
The Chosun Ilbo and Korea's largest second-hand car dealer SK Encar analyzed depreciation of domestic and imported cars from 2012. In general, three-year-old cars are most popular in the used car market.
The 2012 Kia Sorrento R SUV holds up remarkably well, with a depreciation rate of just 15.8 percent. If it cost W28.74 million new, it still sells for W24.2 million second-hand three years later.
There are no exact prices for models since resale value depends on a number of factors, but this suggests that even after reflecting an additional 10 percent of depreciation, buyers can recoup 75 percent of their investment in this particular model after another three years.
Other SUVs such as the Kia Carnival R and Ssangyong Super Rexton have a depreciation rate of 27.8 and 33 percent. Renault Samsung's QM5 lost 34.2 percent of its value.
The Honda CR-V held up the best among imported SUVs with a depreciation rate of 30 percent. The BMW X6 plunged 38.7 percent in value and the Jeep Grand Cherokee by 44.1 percent.
Depreciation is largely dictated by supply and demand -- if demand outstrips supply, the price naturally goes up. The rule of thumb used to be that big and expensive cars depreciate more, but the current popularity of SUVs has driven up prices of used SUVs as demand increased.
A car's accident history, mileage and trims also determine price of used cars.
Color also plays a role, especially for large cars. One out of every two large sedans registered at SK Encar are black, so those tend to be cheaper, and bright colors also mean lower prices in used car market.
The impact of color is less significant for compact and smaller cars as young drivers buying small cars often do not mind a snazzy color.
The best time to sell a second-hand car is from March to April, the high season, and from just after the summer holidays to October.
Choi Hyun-seok, a dealer at SK Encar, warns that there is a lot of fraud in used car sales, so buyers should review documents carefully and not be guided by price alone.
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