Beyond discounts: Automakers compete on post-purchase care

Services that reduce the cost of owning and maintaining a vehicle after purchase are emerging as a new competitive front in the new-car market, alongside traditional price discounts. Automakers are expanding after-sales benefits such as free maintenance and extended warranty periods, and products that cover the insurance deductible a driver must pay after an accident have also appeared.

Automakers and imported-car dealers have recently been rolling out a range of after-sales services for new-car buyers, industry sources said. Rather than one-time cash discounts or gift vouchers, companies are moving toward benefits that deliver tangible value throughout the ownership period as a way to win customers.

The shift also reflects a growing tendency among consumers to weigh long-term costs such as running expenses, not just the purchase price.

In a survey conducted earlier this year by auto-commerce platform company Chabot Mobility targeting 450 prospective new-car buyers, 66.8 percent of respondents cited price as the most important factor when purchasing a vehicle. The share who selected fuel efficiency and maintenance costs also reached 53.8 percent.

In response, automakers have been rolling out a succession of services available to customers even after they take delivery of their vehicles.

Renault Korea offered its "R:Assure Basic" service free of charge in March to buyers of the Grand Koleos midsize SUV. The service covers one engine oil change, oil filter replacement, air cleaner replacement and a vehicle inspection — each performed once within one year or 15,000 kilometers of delivery.

Genesis provides vehicle-care benefits through its "Privilege" membership service for new-car customers. Customers can choose from a range of options, including an all-in-one vehicle-care package that combines polishing and glass-coating treatments in a single visit.

Imported-car brands have also moved to expand after-sales services. Peugeot ran a program from August through September that extended the standard three-year warranty to five years or 100,000 kilometers for new-car buyers. The brand also improved service convenience by introducing an online reservation system at its authorized service centers nationwide.

Support at the dealer level is also taking shape. Hanssung Motor, an authorized Mercedes-Benz dealer, previously offered new-car buyers a benefit covering the insurance deductible incurred when repairing a vehicle after an accident — up to 500,000 won ($377) per claim, for a maximum of three claims within one year of vehicle registration.

The competition in services is tied to growth in the imported-car market. According to the Korea Automobile Importers & Distributors Association (KAIDA), new registrations of imported passenger cars in Korea totaled 279,729 units in the first nine months of this year, up 24.1 percent from the same period last year.

As the market expands, competition for customers at the point of sale has intensified. At some dealerships, sales staff are using a portion of their commission incentives to offer customers additional discounts — a practice known as "advance commission discounting." However, critics note that such discount competition can shift the financial burden onto individual sales employees.

"Cash discounts lead customers to compare figures and walk away, with no follow-up transaction," an official at an imported-car dealership said. "Even with the same budget, after-sales care benefits that customers experience during ownership raise both satisfaction and the likelihood of returning."

More recently, services have emerged that cover repair costs a driver must pay out of pocket when an accident occurs.

Even when a vehicle is repaired through auto insurance, drivers are typically required to pay a deductible under the terms of their policy. Minor scratches or scuffs can still generate out-of-pocket repair costs, and a history of insurance claims can push premiums higher.

To ease that financial burden, Chabot Mobility last month launched "Chabot Care," a new-car management service.

The flagship "Deductible Care" feature covers the insurance deductible arising after an accident claim — up to 500,000 won per incident, for a maximum of two incidents, with a total ceiling of 1 million won ($755).

A separate "Parts Care" feature covers repair costs from everyday vehicle damage such as stone chips, door dings and scratches, also up to a maximum of 1 million won.

Chabot currently provides customers who purchase a new car through its platform with a complimentary "100-Day Peace of Mind" care service, available for 100 days after delivery. General new-car buyers can also access a combined Deductible Care and Parts Care service by purchasing a designated driver and maintenance coupon pack.

Chabot has also made these services available as purchase benefits that new-car dealers and agencies can offer their customers directly, allowing sellers to provide post-delivery care without securing their own maintenance facilities or operational staff.

"A gift voucher's benefit ends on delivery day, but a care service keeps the customer thinking of the dealer for as long as they drive the car," an official at a new-car sales agency said. "A growing number of businesses are looking at restructuring their customer benefit packages around care services."

The push to lower the costs of owning and using a vehicle is also visible in the long-term car rental market. Lotte Rent-a-Car on Thursday added the Genesis GV80 Hybrid to its "My Car Free Return Premium" product, which allows customers to return a vehicle without an early-termination penalty after 24 months of a contract.

Industry insiders expect competition in services that maintain customer contact after delivery to grow, separate from vehicle price discounts.

"The benchmark for new-car benefit competition is shifting from 'how much can you knock off the price' to 'how worry-free can you make ownership after delivery,'" an industry official said. "The tighter the discount margin for a sales channel, the greater the demand for service-based benefits will become."