SEOUL, Jun. 8 (Korea Bizwire) — Sales financing companies for German car dealers in Korea are still applying 7 to 9 percent interest rates for financing plans offered to customers, even though the Korean base rate has dropped to 1 percent.
Some companies are luring customers into paying interest whose total amount is even higher than a discounted amount, by failing to tell them of the high interest rate. Financing companies for domestic car brands are offering plans with an average of 4 percent interest.
According to Yonhap News Agency, estimate sheets on installment pay plans received from Volkswagen, Mercedes-Benz, Audi and BMW dealers only featured numbers about the monthly installment and the term, while information about the total amount of interest and the interest rate was missing.
For instance, an office worker shared a story with Yonhap about how a Volkswagen dealer offered them a 3.65 million won (US$ 3,255) discount when purchasing a Tiguan 2.0 TDI BMT Premium with a financing plan.
The dealer did not inform them about the interest rate, and the office worker found out later that they had to pay 4 million won (US$ 3,567) in interest over three years.
Volkswagen sold a bond with a 2 percent yield in April, while Mercedes-Benz and BMW issued bonds to yield 2.46 percent and 2.53 percent respectively.
Industry representatives said that German car importers and associated financial companies are earning excessive profits by charging an unreasonable amount of interest for their payment plans considering the yields on their bonds.
By John Choi (email@example.com)