Rev Up Your Options: Credit Card vs Capital Auto Loan – Which Route to Take for Your Dream Ride

• Auto loan reduction due to increased procurement cost burden
  Card companies, credit sales performance increases due to installment payments

Asia Today Reporter Choi Jeong-ah = #After much deliberation, Mr. Kim recently purchased a new car using a credit card installment payment. This is because the interest rate is lower than that of capital, and if you pay a portion of the advance payment, you can receive a cashback benefit of up to 1% of the vehicle price. Of course, there were hassles such as comparing interest rates and benefits through the credit card company website directly without the help of a car dealer, but I was able to purchase a new car at a more economical price.

Recently, the ‘credit card installment payment’ method has emerged as a trend in the automobile finance market. As credit card companies lost interest rate competitiveness in the automobile installment finance (hereinafter referred to as auto loan) market due to the high interest rate trend that has continued in recent years, they chose a strategy to increase credit sales performance through credit card installment payments. From the consumer’s perspective, it is advantageous because they can simultaneously receive credit card cashback and various discount benefits at a lower interest rate than auto loans. However, capital companies also have advantages. Not only can the loan limit be increased, but the price discount can be higher if you choose a captive capital company. As there are more choices than in the past, it is a good idea for consumers looking to purchase a new car to carefully consider the benefits.

There are two ways for car finance consumers to pay for a new car: car installment finance (hereinafter referred to as auto loan) and credit card payment. Auto loans can be made through commercial banks as well as capital companies and credit card companies.

According to the Financial Supervisory Service on the 3rd, the automobile installment finance (auto loan) assets of the five card companies Shinhan, Samsung, KB Kookmin, Woori, and Lotte Card are KRW 9.6909 trillion. This is a 4% decrease compared to the same period last year. It is analyzed that the auto loan business has been reduced compared to before as the burden of financing costs has increased due to the high interest rate trend that has continued in recent years and the auto loan business has fallen behind in interest rate competitiveness. Instead, credit card companies are using credit card installment payments as a breakthrough.

The biggest advantage of credit card installment payment is definitely ‘cashback and low interest rates’. You can easily apply for credit card issuance by using the credit card company’s online-only ‘direct product’, and the interest rate is lower on average than that of capital company auto loans. Another advantage is that if you pay a certain amount of the advance payment, you can receive cashback of about 1% of the vehicle payment amount. However, you can only receive these benefits if you have a high credit rating. For people with low credit, it is not only difficult to get a credit card, but also the loan limit is limited.

On the other hand, capital companies have a lower credit rating threshold compared to other financial institutions such as credit card companies. This is because credit card companies usually issue credit cards mainly to people with high credit ratings of 1 to 3.

However, even people with high credit have many advantages if they use Capital Auto Loans appropriately. This is because in the case of captive capital companies, you can receive lower interest rates and discount benefits than card companies. In fact, when purchasing a new Hyundai Sonata, the lowest interest rate of captive company Hyundai Capital (cash purchase ratio of 30%, loan period of 36 months) is about 0.3 percentage points lower than the average of credit card companies. If you add the benefits provided by the captive company, you can purchase it at a cheaper price.

An official in the credit finance industry predicted, “The automobile finance market is determined by competition in interest rates. In a high interest rate situation, credit card companies have shifted to credit card issuance strategies, but as interest rates drop, interest rate competition will unfold again in auto loans as well.” .

ⓒ “Young power, mobile number one Asia Today”

▶
▶ ‘Myung Tae-gyun List’ Now is the time for the prosecution
▶ North Korea ICBM response… U.S. strategic bomber deployed for fourth time this year
▶ Mayors and provincial governors say, “Korea, stop division and conflict and focus on the unity of party and government.”
▶ US presidential election, close race with 1% bloodshed… ‘Shai’ determines victory or defeat
Choi Jeong-ah newswoman@asiatoday.co.kr