Card Issuers Downsize Auto Loans amid Difficulty in Raising Funds

Cars traveling on the Gyeongbu Expressway linking Seoul and the southeastern city of Busan in this file photo. (Yonhap)

SEOUL, Nov. 8 (Korea Bizwire) — A number of South Korea’s credit issuers and credit finance firms are downsizing their auto installment financing offerings due to the difficulty in raising funds in a prolonged high interest rate.

For these companies, installment interest rates for new cars (based on an installment period of 60 months) stood between 6 and 7 percent this month.

Hyundai Capital Services Inc., the country’s leading auto finance company, provides installment financing at an annual interest rate of 6.1 percent when customers buy new cars from its affiliated Hyundai Motor Co. and Kia Corp., about twice as high as several months ago.

The installment interest rates of other firms are higher than that, with all of them standing at over 6.5 percent.

The primary factor behind the hike in their car installment interest rates is the spike in the market fundraising rate resulting from the increase in interest rates in and outside the country.

The interest rate for corporate bonds issued by credit card companies with a maturity of three years stood at 6.1 percent on Nov. 4, up 3.7 percentage points from late 2021.

Industry watchers said that some companies are essentially opting for demarketing — attempting to reduce consumption — by increasing installment interest rates.

J. S. Shin (js_shin@koreabizwire.com)