Another Big Income Source

Financial subsidiaries of car importers in South Koreaare continuing to show a double-digit annual growth.
Financial subsidiaries of car importers in South Koreaare continuing to show a double-digit annual growth.

 

It has been found that finance companies belonging to car importers in South Korea, such as Mercedes Benz Financial Service Korea and BMW Financial Service Korea, are continuing to show a double-digit annual growth.

Mercedes Benz Financial Service Korea, for example, posted an operating profit of 43.1 billion won (US$38.7 million) in the first half of this year. For reference, its operating profit totaled 47.1 billion won (US$42.3 million) in 2015 as a whole, 19.5 billion won (US$17.5 million) in the first half of 2015, and 65.7 billion won (US$59.1 million) last year.

BMW Financial Service Korea’s operating profit for the first half of 2017 reached 13.9 billion won (US$12.5 million), up 30% from a year ago. Its operating profit was 24.2 billion won (US$21.7 million) in 2015 and 27.5 billion won (US$24.7 million) in 2016.

Volkswagen Financial Service Korea is in the black as well although its business has been suspended for about a year so far. Still, the business suspension has led to some decline in its operating profit. Its H1 operating profit fell from 28.8 billion won (US$25.9 million) to 22 billion won (US$19.8 million) between last year and this year. However, its profit is likely to rise rapidly again once Audi Volkswagen Korea’s marketing activities are resumed in the near future.

Those companies’ rapid growth is because more and more customers are using their installment plans with high interest rates. Similar South Korean companies adopt an installment rate of 3% to 5% in most cases whereas the foreign companies’ are 6% to 7%. Specifically, the maximum and average rates are 8.56% and 6.47% in the case of Mercedes Benz Financial Service Korea. According to the Credit Finance Association, the average rate is 7.5% for Volkswagen Financial Service Korea and BMW Financial Service Korea’s maximum is 13.7%.

 

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