As the concept of car ownership diversifies with options like leasing and renting, the scale of the auto financing market is growing, leading to fierce competition as credit card companies join the existing strong players in the capital sector. Some analysts point out that excessive competition is making the auto finance market resemble a "chicken game."
According to the Financial Supervisory Service's financial statistics information system on the 6th, the unpaid balance of auto installment financing for 24 small and medium-sized capital companies, referred to as the "pioneers" of auto financing, was 9.5896 trillion won as of September last year, an increase of about 8% compared to 8.8882 trillion won in the same period the previous year.
In contrast, the outstanding balance of auto installment financing for seven credit card companies (Woori, KB Kookmin, Lotte, BC, Samsung, Shinhan, Hana) was 9.3862 trillion won as of September last year, reflecting a decrease of about 5% from 9.8994 trillion won during the same period of the previous year.
The same trend is seen in leasing. The outstanding balance of auto leasing financing for the 24 small and medium-sized capital companies was 20.5788 trillion won as of September last year, a slight increase compared to 19.8279 trillion won in the same period the previous year.
In contrast, the outstanding balance of auto leasing financing for the seven credit card companies was 5.944 trillion won as of September last year, down from 6.3232 trillion won during the same period the previous year.
Credit card companies are pursuing capital companies by lowering interest rates. Samsung Card is securing competitiveness by offering lower vehicle installment rates compared to capital companies, while Hyundai Card is responding by significantly increasing vehicle installment and dealer commission rates.
However, the strategy of lowering interest rates could lead to a chicken game. Earlier this year, there were concerns that the entire industry was facing a crisis due to high interest rates. As high interest rates and inflation persist, consumer purchasing conditions have deteriorated, and arrears in installment payments have reached the hundreds of billions of won, leading to non-performing loans.
Recent expectations for improved conditions due to interest rate cuts have emerged, but the situation remains dire. Projections indicate that the U.S. will slow down its rate cuts this year, and domestically, financial authorities are tightening loan regulations ahead of the implementation of the third phase of the total debt service ratio (DSR).
An industry official noted, "Capital companies are trying to focus on their core business of auto financing due to bleeding from aggressive expansion into real estate project financing, while credit card companies, affected by consumer spending slumps, are also seeking to enter the auto industry, which is relatively regarded as a high-quality loan sector." They added, "In a challenging economic environment, if competition over interest rates intensifies, it could ultimately lead to losses for both sectors."