Interest Rates in the 0% Range... Car Financing Competition Heats Up Again

Card Companies Rejoin... Samsung and Woori Offer Low 5% Range
Ultra-Low Interest Rates Provided for Certain Car Models

Since the end of last year, when a cold wave hit the auto installment finance market, fierce competition has re-emerged. While interest rates from major card companies and capital firms have dropped to the 5% range, some models are even seeing interest rates in the 0% range.

According to the Credit Finance Association on the 9th, the lower end of auto installment interest rates from six major card companies?Shinhan, Samsung, KB Kookmin, Hana, Woori, and Lotte?is between 5.2% and 6.9% (based on the Hyundai The All New Grandeur, 30% cash purchase ratio, and a loan period of 36 months). Compared to the end of last year, when the lower end exceeded 7.3%, this marks a drop of about 2 percentage points this year.

Woori Card and Samsung Card, which announced new rates this month, have the lowest lower-end rate in the industry at 5.2%. This is even lower than Hyundai Capital, the exclusive financial company of Hyundai Motor Group, which provided stable mid-5% interest rates even when bond market rates froze. As market interest rates froze and new car delivery waiting times lengthened due to parts supply issues, card companies that had been somewhat lukewarm about the auto installment finance market are now adopting aggressive interest rate policies again.

In response, capital firms are also actively targeting the market. BNK Capital, which did not lower auto installment interest rates below 10% even in March when the credit finance specialized bonds (AA+, 3-year bonds) stabilized in the 3% range, recently adjusted its lower-end rate to 8.6%. An industry insider explained, "Even when market interest rates were somewhat stable, some companies maintaining double-digit rates essentially meant they would not handle auto finance for the time being, but the atmosphere has recently changed."

Some companies offer ultra-low interest rates in the 0% range under certain conditions. Judging that they lack cost competitiveness in auto finance compared to card companies that can receive merchant fees, they are seeking breakthroughs with specialized rates for individual products. Hyundai Capital, the exclusive financial company of Hyundai Motor Group, is particularly aggressive. For the Hyundai 'Casper' vehicle, if more than 1% of the vehicle price is paid as a down payment using Hyundai Motor exclusive cards or Hyundai Card M series cards, rates as low as 0.9% (based on 36-month installments) are offered. For Hyundai SUVs such as the Nexo, Santa Fe, Palisade, Ioniq 5, and Ioniq 6 produced before May this year, a 3.5% rate (based on 36-month installments) is offered. BMW Financial Services, the exclusive financial company for BMW, supports interest-free installments for some models. Mercedes-Benz Financial Korea offers 0.01% interest for the eco-friendly electric vehicle Mercedes EQE 350+ model.

Although credit finance specialized bond rates, which had fallen to the high 3% range until April, rose back to the 4% range from the end of last month, competition is expected to continue for the time being. This is because there is a time lag before the 4% bond rates are reflected in actual loan products, and loan demand is expected to increase with various new car launch schedules. A credit finance industry official said, "With Hyundai’s successive new car launches and bond rates having fallen compared to the beginning of the year, competition is heating up as interest rates are lowered," adding, "Although market interest rates have slightly rebounded, it seems companies believe they cannot miss the current market atmosphere."

On the 30th, Hyundai Motor's 'Sonata The Edge' was unveiled at the '2023 Seoul Mobility Show Press Briefing' held at Kintex in Goyang, Gyeonggi Province. Photo by Jinhyung Kang aymsdream@