Not Making Payments

 

The number of imported cars put up for court auction increased 42.8 percent from a year earlier, and more than five-fold compared to the same period of 2012, to 320 in the first quarter of this year. The number for April 2015 increased 37.6 percent year-on-year to add up to 95, too. Last year, a total of 196,395 imported cars were sold in Korea to record a year-on-year growth of 25.5 percent.

The majority of car importers in Korea recommend installment purchases, because it can add to the sales of their financial arms. They give advance notice when the payment of the installment and interest is two months overdue. Then, they terminate the contract to initiate collection.

They are maintaining high installment interest rates, although the key interest rate determined by the Bank of Korea is at a record low of 1.75 percent. For example, the installment interest rates range from 7 to 9 percent for most of the top five foreign automakers’ mid-size sedans purchased with a 10 percent down payment on a 60-month installment plan.

The financial service providers are boosting their profits under the circumstances. Volkswagen Financial Service Korea recorded 20 billion won (US$18.5 million) in operating profits last year to post a 62.6 percent increase year-on-year. The profits of BMW Financial Service Korea and Mercedes Benz Financial Service Korea amounted to 31.5 billion won (US$29.2 million) and 18.7 billion won (US$17.3 million) in 2014, respectively.

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