As financial authorities consider easing limits on rental exposure for the credit finance industry, the gap between the positions of capital companies and rental car firms remains wide. Although capital companies have rolled out support measures for small and midsize rental car firms, such as interest rate cuts and principal repayment deferrals, the rental car industry still has concerns about market encroachment.
According to the financial sector on the 15th, the Credit Finance Association, the Korea Rent-a-Car Business Association Federation, the National Rent-a-Car Association, and Hyundai Capital held a policy meeting on the 13th of last month and discussed a win-win plan that includes financial support for small and midsize rental car firms and ways to improve the system. The plan includes measures for capital companies to lower lending rates for small and midsize rental car firms, defer principal repayments for about six months, and offer preferential treatment on lending limits.
Capital companies presented these support measures to ease the rental car industry's backlash against the Financial Services Commission's ongoing push to relax rental exposure limits. Under the current supervisory regulations for specialized credit finance businesses, a capital company's rental assets cannot exceed the size of its core leasing assets. Capital firms have argued that, as auto consumption shifts from leasing to long-term rentals, the regulation is blocking business expansion, and the Financial Services Commission has reflected this by reviewing amendments to the supervisory regulations since Nov. last year.
Some rental car firms supported the easing of regulations. The National Rent-a-Car Association, whose members include large firms such as SK Rent-a-Car and Lotte Rental, conditionally agreed to deregulation on the premise of win-win financial support. The idea is that interest rate cuts, higher lending limits, and principal repayment deferrals could help ease management burdens for small and midsize rental car firms. The National Rent-a-Car Association has 31% (219 companies) of rental car firms nationwide as members.
Small and midsize rental car firms, however, remain opposed. They say that if financially powerful companies fully enter the rental market, their operating base could be weakened. The Korea Rent-a-Car Business Association Federation, which has 52% (370 companies) of the 710 rental car firms nationwide as members, delivered an opinion to the Financial Services Commission (FSC) last month opposing capital companies' encroachment into the rental car market. According to the opinion, 17 specialized credit finance companies that entered the rental car market hold about 44% of all registered vehicles, while the market share of roughly 1,000 small and midsize firms stands at the 11% range.
Capital companies counter that even if regulations are eased, the likelihood of direct competition with small and midsize rental car firms is low. Because capital companies cannot operate short-term rentals under one year, they mainly compete with large operators in the long-term rental market, they said. Small and midsize rental car firms, however, argue that this would still limit their opportunities to enter the long-term rental market, which could become a new revenue source in the future.
A credit finance industry official said, "The financial authorities' plan to ease rental exposure limits appears to be largely set, but the timetable is being delayed as opinions are split even within the rental car industry."