With the rise in interest rates and an increase in the sales of high-priced vehicles, the import car industry is experiencing a significant boost in profits from automotive installment financing.
According to industry sources on Aug. 16, Mercedes-Benz Financial Services Korea, an affiliate of domestic Mercedes-Benz and Daimler Truck automotive finance, reported revenue of 88.8 billion won (US$66.29 million) in the first half of this year.
This marks a substantial increase of 53 percent compared to the same period last year.
Mercedes-Benz Financial, in particular, achieved interest income of 49.5 billion won, marking a 63 percent hike compared to the same period last year, attributed to car installment sales in the first half of this year.
Additionally, lease income, which primarily stems from corporate vehicles, totaled 37.9 billion won, showing year-on-year growth of 44 percent.
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Volkswagen Financial Services Korea, which offers automotive installment financing services to brands like Volkswagen and Audi, also witnessed substantial growth in interest income for the first half of this year.
Interest income surged by nearly twice the amount compared to the same period last year, reaching 12.4 billion won. Moreover, installment financing profits amounted to 18.8 billion won, showcasing a 12 percent increase year-on-year.
However, lease income declined by 34 percent, standing at 183.3 billion won.
The significant surge in interest income for import car financing companies can be attributed primarily to the rise in interest rates.
The Bank of Korea’s base rate, which stood at 1.25 percent at the beginning of last year, has now reached 3.5 percent as of this month.
An industry insider in the import car sector stated, “The interest rates for financing new imported vehicles generally range from around 9 percent to 10 percent, and in some cases, can even exceed 13 percent.
Considering factors like mid-term repayment penalties of up to 2 percent and overdue interest rates, the actual perceived interest rates are even higher.”
The increase in sales of high-priced imported vehicles has also contributed to the boost in revenue from import car financing.
According to the Korea Automobile Importers & Distributors Association, the number of high-priced imported vehicles priced above 100 million won reached a record high of 37,239 units, though the overall sales of imported vehicles in the first half of this year slightly decreased compared to the same period last year, reaching around 131,000 units.
High-end vehicles now account for nearly 30 percent of the total imported car sales. (Source)
