As the economic recession continues, compact cars are gaining popularity. Due to increased demand caused by high interest rates and inflation, compact cars surpassed 100,000 units in annual sales in the domestic market for the first time in three years last year. According to Kaizu Yu Data Research Institute, 133,294 compact cars were sold in the domestic market last year, a 38.7% increase from the previous year.
In fact, compact cars are a prime product that thrives during economic downturns. After the international Monetary Fund (IMF) crisis in 1998, compact cars sold 156,521 units in a year, capturing 27.6% of the domestic market share. Following the global financial crisis in 2008, sales continued to rise, surpassing 200,000 units in 2012.
In the used car market, compact cars are consistently sold without significant price declines. According to the February used car price index released by the Korea Automobile Transaction Business Association, while high-priced listings still see significant price drops, compact cars have maintained stability. Kia Morning ranked second in the nationwide sales ranking of domestic used cars last December, following Hyundai Grandeur. The most popular used cars among people in their 30s and 40s were the 2011 Kia Morning (TA) and the 2010 Kia New Morning (SA), respectively.
The factors contributing to the popularity of compact cars include their low vehicle prices and maintenance costs, making them less burdensome for first-time buyers. With the new school season approaching, there is also an increase in demand among parents looking for a second car for transportation. Compact cars enjoy a tax reduction benefit of up to 750,000 KRW, which lowers the ancillary costs of purchasing a vehicle, and their maintenance expenses are relatively low compared to medium and large cars, providing excellent value for money. Additionally, eligible buyers can apply for a fuel tax refund card, allowing them to receive up to 300,000 KRW in fuel tax refunds annually.
On the used car e-commerce platform ‘Carmus’, launched last November, affordable compact car listings are also selling out relatively quickly, highlighting their popularity. Carmus is a used car e-commerce platform that allows the entire process, from registration to purchase, financing, and returns, to be done 100% on mobile. Every listing registered by dealers is fully guaranteed by Carmus, and in case of a refund due to mere change of mind, the entire purchase amount is refunded, allowing consumers to purchase used cars confidently without the worry of fraudulent listings.
In-seong Han, the CEO, stated, “We have been seeing a quick turnover of compact cars priced under 5 million KRW, which are more affordable than compact cars priced around 10 million KRW. With the arrival of the school season and employment issues in March, we expect the demand for compact cars to continue to increase. Therefore, if there are reasonably priced compact cars available, we recommend purchasing them immediately.”
Lee Sang-jin daedusj@autodiary.kr