How and Why to Buy a Used Car from Japan

Japan car importOn online vehicle marketplaces based in Europe, you can see phrases like re-import from Japan, Japan market vehicle and Japan import being used with increasing frequency. So what is it about used vehicles from Japan, particularly those of European origin, that makes them so attractive? Why would anyone import a Mercedes or BMW or Porsche from Japan – how does this make financial sense?

By total area, Japan ranks 62nd in the world – but with a population of over 125 million, equivalent to Germany and Spain combined, it’s the 10th largest country on the planet. This makes Japan one of the most densely urbanized nations, a factor which contributes significantly to the attractiveness of its car market – accounting for just 50% of annual travel by its citizens, Japan has the lowest level of car usage in the G8. This means that their used cars have a noticeably lower mileage when compared to those on sale in Europe.

Another key factor is the climate – the average temperature in Japan remains above zero (C) for most of the year, reducing the number of climate-related issues. In Europe, a 10+-year-old car without even a small degree of rust is a rare find. In Japan, it is more often the case than not that the bodies of older cars are in excellent condition and don’t suffer from rust at all.

Over 60 million passenger cars see daily use on Japanese roads and, with a contribution of around 7% to the total of all new cars sold globally every year, over 4 million new units take to said roads annually. Befitting its status as one of the leading global car manufacturers, Japanese vehicles perform well on the home market – but even at a single-digit-percentage contribution to said 4 million, the number of imported passenger cars is high, with over 300,000 foreign vehicles being sold annually. The vast majority of these 300,000 cars are of European origin – and thus there is plenty of choice in the used car market when searching for European cars.

Some years ago, the biggest argument in favour of buying a car from Japan was the price. This might still be the case, but definitely not always. I’ve been searching for certain European cars for quite some time and can confirm that, when all the relevant fees (shipping, taxes, modifications necessary for the cars to be road legal in the EU, etc.) are taken into account, the total cost would be similar to the prices offered in Europe. Obviously, a wider range of choices and the generally better condition of said used cars presents several valid arguments for opting for used “Japanese” cars.

WHAT YOU NEED TO KNOW IF BUYING A USED CAR FROM JAPAN

As in the UK, Japan has left-hand traffic and thus many of the vehicles are right-hand drive (RHD), but left-hand drive (LHD) is common amongst imported (non-Japanese) cars. Although conversion from RHD to LHD is possible, depending on the make and model this can be costly. Further, such conversions may not be legal in the country the car is to be registered in – the VIN code on each vehicle contains information about which side the steering is on, which may cause problems if you attempt to register the car as having the opposite setup. It’s thus highly recommended that, if you do pick a car from Japan, you choose one which has steering appropriate for the country of registration.

If you are looking for a used Japanese car, it is clear that your best option is the second-hand car market in Japan.  However, it’s important to bear in mind that cars manufactured for local use are almost invariably RHD, whilst those exported to other countries are available as both RHD and LHD models.

If you purchase a LHD car from Japan, the headlights must be adjusted before registering the car. Although the steering wheel may be on the desired side, the lights are configured for use in RHD traffic and thus have strongest illumination at the front-left, whereas LHD traffic requires the light to be cast front-right to illuminate obstacles and road signs from an adequate distance whilst limiting the glare for oncoming traffic. Such headlight conversions are normally quite simple and inexpensive, only requiring adjustment to the reflectors and no replacement of components.

For newer, post-2009 cars it is important to pay attention to emission data – according to European legislation, any car produced after September 2009 must comply with EURO 5 emission regulations. Japan, however, is not as strict, requiring only that the equivalent of EURO 4 regulations is met. Some, but not all, European car manufacturers supply EURO 5-compliant cars for the European market but only fulfil EURO 4 criteria for cars exported to Japan. This needs close attention – you don’t want to end up in a situation where the DVLA/DMV asks you to convert the car from EURO 4 to EURO 5-compliant before you can legally register it in Europe. A local car dealer will be able to assist you in figuring out the vehicle’s emission class based on its VIN code.

MOST OF THE USED CARS ARE SOLD AT AUCTIONS

In Japan used cars are mainly sold at auctions, which are enormous in scale – the biggest yard, USS Tokyo, covers an area larger than 100 soccer fields and accommodates 20,000 cars, with thousands of dealers bidding and an average of 15,000 cars being sold every Wednesday. There are a total of over 30 well-known auto auction groups, distributed throughout the country at over 200 locations.

Most of the auctions are open exclusively to authorized dealers, who usually also act as local representatives and shipping agents for buyers outside Japan. They charge a commission for such services – widely used rates vary between 7-10% of the purchase price.

Due to the huge volume of cars sold at once, test drives aren’t possible and car owners are hidden from the bidders. Auctioneers only provide a few photos of the car along with an independent evaluation inspection sheet, which together form the basic information that a dealer has on the car available for bidding. These inspection sheets include all key data regarding a car – its make, model, VIN code, date

Japan car auctions and import
Auctioneers provide a few photos of the car along with an evaluation inspection sheet, which together form the basic information that a dealer has on the car available for bidding.

of first registration in Japan, mileage – but also information about its body condition, possible scratches, rust, interior condition, engine etc. All this is summarised as a grade on the inspection sheet, ranging from a best possible grade of 6 (or in some cases S) – referring to as new or flawless cars – to the worst grade of 1, which refers to flood damage or similar. In addition, grade R is widely used to refer to a historical accident the repaired condition. Many of the buyers (and almost all of the internet bidders) make their decisions and bids based purely on the photos and the information provided on the inspection sheet.

Before an auction, dealers have the opportunity to check the cars in person. Shuttle buses take them to the right section inside the auction yard (to where a specific car is parked), allowing them to inspect it in detail, including starting the engine and changing gears – though the car cannot be moved from the spot. Before making the final decision on whether to bid for a certain car, customers can ask the dealer to go and inspect the vehicle and provide them with a detailed overview, including further photos or videos and a description, although this is something that needs to be agreed on directly with the dealer and may incur small extra fee. An extra inspection can also be ordered from auctioneers if the dealer is bidding over the internet and cannot inspect the car(s) themselves.

There is one specific term you should be aware of. Let’s say you’re looking at a listing for a white car, but part of the description includes the word grey. This does not mean that the Japanese have made a mistake – in Japan car market terminology grey refers to non-dealer imported vehicles and in this context likely implies that it’s a used car imported into Japan (though it can also refer to a new car not imported by an official dealer).

Usually most of the cars get sold during an auction; however, in some cases owners have set certain minimum price limits and if this limit is not met, even if you made the highest bid during the auction, the car will move into the unsold category. It is worth mentioning that post-auction negotiations can start a higher minimum price level – for example, the car that remains unsold at JPY 2.5m may be open to start negotiations at JPY 3m.

SHIPPING AND IMPORTING FROM JAPAN

In general, there are two possible options for shipping cars from Japan. Firstly, they can be driven onto a RO-RO-type vessel in Japan and driven off at the RO-RO destination port. This is the easiest solution, but can only be used if a RO-RO cargo line exists between a port in Japan and somewhere close to your desired destination, where you could unload the car. This is not always the case, though most of the major European ports (including many in the UK, the Netherlands, etc.) have such capacity. The prices vary over time, but shipping an average passenger car on a RO-RO vessel from Japan to Amsterdam can cost you in the region of €1000.

Cars shipped in container Japan car import
A 40ft container can fit four regular-sized cars

Containers can be used to ship things to pretty much every port in the world – a 40ft container can fit four regular-sized cars. However, this is somewhat more complex, as loading and unloading are challenging – the cars are loaded into the container on two levels, with two at the bottom and two hanging above them. Prices vary, but shipping a 40ft container from Japan to Helsinki costs in the region of €2000-3000.

Certain taxes apply on cars imported from outside the European Union. Firstly, there is a 10% duty on CIF, meaning a 10% tax will be applied based on the sum of the car’s cost (C), insurance (I) and freight (F) expenses. If the car cost €10,000 and insurance and tax totalled another €1000, a tax of €1100 would be payable. On top of that, country specific VAT must also be paid – this varies in the EU from state to state, but a common rate used in many countries is 20%. An extra 20% must thus be added to the cost of the car, the freight/insurance and the CIF. The final calculation would look something like the following:

  • Car (including Japanese dealer commission) – €10,000
  • Freight and insurance – €1000
  • 10% duty based on CIF – €1100
  • 20% VAT based on the €12100 total (car + freight/insurance + CIF) – €2420

A car worth €10,000 purchased from Japan will thus end costing a total of €14,520 when all transport fees and taxes are taken into account. Additional DVLA/DMV inspection and registration fees would then be due as well. If you are buying the car under your company’s name, you may be able to claim back (at least part of) the VAT depending on your country’s tax regulations. For private individuals, such potential tax returns are not available.

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