The Ministry of Land, Infrastructure and Transport said on the 6th that as early as the second half of next year, if a major defect is found in key components such as the engine within seven days after purchasing a used car and the repair cost or repair period is excessive, consumers will be able to cancel the contract. Until now, there was no clear way to get a refund, so consumers had to file civil suits. The plan is to restructure the market so used-car sellers are directly responsible for vehicle quality.
The Ministry of Land, Infrastructure and Transport (MOLIT) announced consumer protection measures for used cars at a national policy coordination meeting chaired by the prime minister on the 6th. The aim is to strengthen sellers' warranty responsibility for defects and improve transparency of price and performance information to create a market where consumers can conduct a transaction with confidence.
First, it will codify standards for consumers to cancel contracts. The Motor Vehicle Management Act will be revised so consumers can receive refunds if, within seven days of purchase, a defect occurs in a major component and the resulting repair cost is 3 million won or more and at least 30% of the vehicle price, or if the repair period is 30 days or more. Currently, even when a vehicle has problems, responsibility is divided between the seller and the performance inspector, making it difficult for consumers to be compensated.
In addition, insurance previously purchased by performance inspectors will be consolidated, and dealers will be required to enroll in the performance insurance. The intent is to shift to a structure where used-car sellers are directly responsible for vehicle quality, encouraging more thorough management of vehicle condition. Since performance insurance was introduced in 2019, dealers and performance inspectors came to believe they could simply rely on insurance when defects occurred, weakening incentives for quality control and causing side effects.
Since the introduction of performance insurance, premiums passed on to consumers have increased 2.2 times in five years, and business expenses such as acquisition commissions and operating costs accounted for 44% of the premiums. The government expects that if defect rates fall as seller responsibility is strengthened, the premium burden will also decrease.
The way used-car prices are displayed will also be improved. When advertising vehicles on internet platforms, sellers will be required to display the total aggregates, including all fees such as performance insurance premiums, management fees, and brokerage commissions, in addition to the vehicle price. Currently, vehicle prices are often listed low in online ads, with various expenses demanded later during the contract process.
The reliability of performance and condition inspections will also be enhanced. The performance inspection report will be revamped to reflect real-world conditions, and detailed inspection guidelines will be prepared. If key items such as flood or accident history are inspected incorrectly, administrative sanctions such as business suspension can be imposed regardless of intent. According to the Korea Consumer Agency (KCA), about 80% of complaints related to used cars received over the past three years were about deficiencies in the performance and condition inspection report.
If diagnosis errors by sell-my-car platforms cause losses to dealers or vehicle owners, compensation standards will be established based on the actual level of damage. One-sided restrictions on service use will also be prevented when users are not at fault.
The Ministry of Land, Infrastructure and Transport (MOLIT) plans to introduce related legislative amendments in Sep. and, after revising subordinate regulations, push for implementation in the second half of next year.