Car Financing Differentiation by Hyundai Capital: Interest-Only Payments for 1 Year... Variable Interest Rate Applied

Fixed-Rate Products Also Offered at 5% Range
Prepayment Ratio Reduced from 10% to 1%

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@

Hyundai Capital is seeking differentiation by launching auto installment financing products that allow customers to pay only interest for one year or apply variable interest rates.

According to the industry on the 10th, Hyundai Capital released a 'hybrid interest-only installment' product last month for purchasing cars on installment. During the total 60-month installment period, customers pay only interest for 12 months, and for the remaining 48 months, monthly payments are made at a lower interest rate of 4.9% than the current installment rate. This contrasts with existing interest-only installment products where higher interest rates were applied after the interest-only period ended.

For example, when purchasing a Hyundai Motor's 'Avante' priced around 26 million KRW with the hybrid interest-only installment plan, customers pay approximately 160,000 KRW in installment interest monthly for the first year. Then, for the remaining 48 months, the monthly payment including principal is 610,000 KRW (applying a 4.9% installment interest rate). Considering that auto installment interest rates offered by credit finance companies were around 5-7% as of last month, this is considered affordable.

In February, Hyundai Capital also quickly launched a variable interest rate product. Most existing auto financing products in the market had fixed interest rates that remained unchanged from the purchase date until maturity. The variable interest rate new car installment product introduced by Hyundai Capital applies a spread over the simple average of the 91-day CD rate provided by the Korea Financial Investment Association, reflecting the financial company's cost of funds, and the installment interest rate changes every three months according to market interest rate conditions. In fact, customers who purchased cars through the variable interest rate installment product in February saw their installment interest rate reduced by 0.36% at the first rate revision this month.

Additionally, Hyundai Capital lowered the interest rates of all installment products, including fixed-rate products, by 1 percentage point in early March. The representative fixed-rate products, ‘Mobility Installment Plan (Hyundai Motor)’ and ‘M Installment Plan (Kia),’ now offer interest rates around 5.7-5.9%. Furthermore, the down payment requirement for installment products was reduced from 10% to 1% of the vehicle price to ease the initial financial burden.

A Hyundai Capital official explained, "In an environment with increased interest rate volatility, we are diversifying financial products so that car buyers can choose products that fit their financial situations."

This content was produced with the assistance of AI translation services.