Auto Financing
The Credit Finance Association announced on August 17 that a total credit card payment for new car purchase in South Korea increased by 23.5% from a year ago to 13.87 trillion won (U$12.06 billion) in the first half of this year. The amount, which stood at 19.7 trillion won (US$17.13 billion) in 2013, jumped to 22.25 trillion won (US$19.34 billion) in 2014 and to 23.92 trillion won (US$20.80 billion) last year.
In the past, South Korean credit card companies used to provide installment financing for car buyers in partnership with installment financing companies. In 2014, however, Hyundai Motor Company expressed its opposition to such installment financing, claiming that credit card companies took a commission of as high as 1.9% without taking an essential role, and then this type of financing disappeared from the South Korean automobile market.
Since then, credit card companies have separated themselves from installment financing companies and released their own installment plans such as auto loans. More recently, they are trying more aggressively to penetrate the market by means of direct auto loans and the like.
It is said that installment financing companies’ dominance in the domestic auto financing market can be threatened by the move of credit card companies, which already have a total of more than 10 million people as their customers. According to industry sources, installment financing currently accounts for 52.8% of the auto sale in the market, followed by credit card payment (32.3%) and payment by cash (14.9%).