Korean consumers consider imported cars despite high maintenance fee

2023.05.25 10:07:02 | 2023.05.25 13:53:34

Hyundai Genesis G80 [Photo provided by Hyundai Motor]이미지 확대

Hyundai Genesis G80 [Photo provided by Hyundai Motor]

More South Korean consumers are considering buying imported cars as the price gap with domestic cars has narrowed with homemade vehicles coming with a higher price tag and enhanced features, although the high maintenance fee is still a burden.

Many consumers believe that the price of imported cars, after big discounts from promotions, is not much different from that of domestic cars.

For durable consumer goods such as vehicles, maintenance cost is an important factor on top of the initial purchase cost. Consumers in developed markets such as the U.S., Europe, and Japan focus on the total cost of ownership (TCO) when purchasing a vehicle while those in Korea consider the purchase cost.

The TCO includes all the costs of operating a vehicle such as fuel costs, insurance premiums, and car taxes in addition to the purchase cost.

Maeil Business Newspaper on Wednesday selected five models of semi-large sedans and compared the TCO to analyze the overall cost of purchasing domestic and import cars.

The models were Hyundai Motor Grandeur 2.5 gasoline Calligraphy, Genesis G80 2.5T gasoline 2WD 19-inch, Audi A6 45 TFSI, BMW 520i Luxury, and Mercedes-Benz E250 Avantgarde.

According to a TCO analysis assuming a purchase of a new car and selling it after 10 years, the TCO of domestic cars were in the range of 70~80 million won ($52,990~$60,560) while that of imported cars were over 100 million won.

By model, Grandeur cost 73.35 million won, G80 84.57 million won, A6 117.02 million won, BMW 5 Series 106.97 million won, and Benz E-Class 110.67 million won.

The analysis shows that the cost difference between purchasing a 5 Series and G80 is 11.8 million won but it doubles to 22.4 million won based on the TCO of 10 years.

The annual maintenance cost for each model including fuel costs, maintenance and repair costs, insurance fees, and car taxes is 3.65 million won for Grandeur, 3.94 million won for G80, 5.19 million won for A6, 4.98 million won for 5 Series, and 5.05 million won for E-Class.

Audi A6 [Photo provided by Audi]이미지 확대

Audi A6 [Photo provided by Audi]

Fuel cost assumes regular fuel consumption and a mileage of 10,000 kilometers per year. The price of regular oil for calculation was 1,697.2 won per liter, the average price in Seoul for the third week of May.

Maintenance and repair cost reflected only minimal maintenance cost such as changes in engine oil, air filters, brake pads, and tires.

The insurance premium, meanwhile, was calculated assuming a new subscription to the direct auto insurance policy of Samsung Fire & Marine Insurance Co. for a 31-year-old male that guarantees only one driver, 200 million won for property including damage to one’s own vehicle, and emergency services.

The insurance premium for imported cars is twice as high as same-level domestic cars. The annual insurance cost for Grandeur is 910,000 won, G80 940,000 won, A6 1.88 million won, 5 Series 1.84 million won, and E-Class 1.6 million won.

In the case of car taxes, comparison has little meaning as they are levied depending on engine displacement.

Import cars can weigh on owners once the five-year quality guarantee period expires. Car parts prices and labor costs of imported cars are two to three times higher than those of domestic cars, the analysis showed.

Import cars are entitled to free repair and maintenance during the quality guarantee period but the cost varies after the warranty period ends. If a problem arises with the transmission, for example, domestic cars cost 2 to 3 million won for replacement while import cars may cost more than 10 million won.

Industry insiders note that many imported cars aged five years and more are put up for sale in the used car market to avoid unexpected costs after the warranty period.

According to Korea’s top used car retailer K Car Co., the average residual value rate, or the price of a used car against that of a new car, for A6 was 41 percent in the fifth year and 15 percent in the 10th year. The residual value rates of 5 Series and E-Class were 51 percent and 52 percent, respectively, in the fifth year and 23 percent and 21 percent each in the 10th year.

This suggests the price of a 10-year-old G80 with a residual value rate of 28 percent is higher than that of a same-level import car.

By Moon Gwang-min and Choi Jieun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]