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Consumer Automotive Financial Services in South Korea

  • November 2014
  • -
  • Finaccord
  • -
  • 46 pages

Consumer Automotive Financial Services in South Korea investigates the market for automotive financial services linked to sales of new and used passenger cars to individual buyers in South Korea. In addition to analysing the market for finance and leasing services, the study also covers motor insurance, road assistance, extended warranties, creditor insurance and prepaid service contracts, plus GAP insurance. Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in South Korea is provided in terms of gross advances and assets leased for 2009 to 2013 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending institutions.

Table Of Contents

Consumer Automotive Financial Services in South Korea
0.0 EXECUTIVE SUMMARY 1
1.0 INTRODUCTION 3
What is this report about? 3
The focus of the report is on financial services related to the sale of passenger cars to individuals 3
Rationale 3
The provision of financial services is essential to support both car sales and profitability 3
This report offers a detailed updated analysis of the subject in South Korea based on primary research 3
Methodology 3
Survey of dealers and manufacturers 3
Market data 4
Computation of market data is based on a complex set of assumptions and variables… 4
…in order to provide market segmentations in unrivalled detail 5
External sources 5
Definitions 6
Finance and leasing products 6
Insurance, warranty and assistance products 6
Operating models 7
Tied and non-tied providers 8
Abbreviations 8
Exchange rate 8
PartnerBASE and market data annexe 8
Finaccord 9
2.0 MARKET ANALYSIS 10
Introduction 10
Passenger vehicle data 11
The Korean market for new car sales has slipped back somewhat in recent years… 11
…although volumes in the used car market have moved up substantially 11
Hyundai and Kia are the dominant car manufacturer brands… 12
although they have lost some ground to fast-growing foreign competitors 12
Consumer automotive finance and leasing market 14
Market size and growth 14
By volume, point-of-sale finance exceeds direct lending for both new and used cars … 14
and the total value of point-of-sale finance has risen quite markedly since 2009 14
Types of finance and leasing product 16
Instalment finance via simple loans makes up over 60% of point-of-sale contracts 16
Consumer automotive insurance, warranty and assistance markets 17
Market sizes 17
In total, the automotive trade is likely to have sold contracts worth over KRW 450 billion in 2013 17
Survey of automotive dealers and manufacturer brands - overview 20
Introduction 20
Provision of consumer automotive financial services 20
Automotive dealers distribute all automotive financial services investigated apart from GAP insurance 20
Manufacturer brands register a higher provision rate than dealers in five product categories 20
Number and nature of dealer schemes 22
Most dealers work with at least two providers for both finance and leasing and for motor insurance 22
Types of creditor insurance policy sold by dealers 24
Where offered, creditor insurance sold with point-of-sale car finance tends to be fairly comprehensive 24
Types of motor insurance policy sold by dealers 25
Among dealers distributing motor insurance, comprehensive cover is always available 25
Sources of road assistance distributed by dealers 26
Road assistance is generally provided automatically to buyers of new cars in South Korea 26
Consumer uptake of automotive financial services through dealers 27
Point-of-sale take-up rates for finance and leasing are fairly high… 27
… and it is generally harder for dealers to sell motor insurance, especially to buyers of new cars 27
Take-up rates for extended warranties have grown substantially in recent years 27
Survey of automotive dealers and manufacturer brands - partnerships 29
Introduction 29
Finance and leasing 30
The majority of dealers surveyed in South Korea utilise both tied partners and non-tied partners… 30
… with Hyundai Capital acting as both a tied and non-tied provider 30
Aju Capital enjoys close ties with dealerships selling GM cars 30
Banks and card issuers are challenging the dominance of traditional competitors in this market 30
Nearly three quarters of all manufacturer brands have organised finance and leasing services 32
with four major European manufacturer groups operating through captive finance arms 32
Hyundai Capital's implied market share of new business exceeds 50% 34
Creditor insurance 34
Creditor insurance is available from just under a quarter of manufacturer brands surveyed 34
Motor insurance 36
Exactly a half of all dealers surveyed distribute motor insurance policies 36
with many focusing on non-tied propositions 36
Hyundai and Kia offer motor insurance through Hi Network, a broker 38
Hyundai Marine and Fire Insurance holds the highest implied market share of new business 40
Extended warranties 41
It is almost entirely the case that dealers limit themselves to selling manufacturer extended warranties only .. 41
Nine of the 26 manufacturer brands investigated are running extended warranty programs 41
Road assistance 43
Non-tied road assistance services are usually provided by the dealers themselves 43
Internally-managed schemes dominate manufacturer arrangements for road assistance 43
Prepaid service contracts 45
Prepaid service contracts are on offer from around a quarter of dealers in South Korea 45
albeit the provision rate among manufacturer brands is vastly higher 45

LIST OF GRAPHICS / TABLES

0.0 EXECUTIVE SUMMARY 1
Key market data for consumer automotive financial services in South Korea, 2013 2
1.0 INTRODUCTION 3
2.0 MARKET ANALYSIS 10
Passenger car parc and new / used passenger car sales in South Korea, 2009 to 2013 11
Passenger car parc and new / used passenger car sales in South Korea, 2009 to 2013 (table) 12
New car registrations in South Korea, segmented by manufacturer group, 2013 13
New and used passenger car finance market in South Korea, segmented by distribution channel: volumes,
2009 to 2013 14
New and used passenger car finance market in South Korea, segmented by distribution channel: values,
2009 to 2013 15
New and used passenger car finance market in South Korea, segmented by distribution channel: values
and volumes, 2009 to 2013 (table) 16
% split between the different types of finance and leasing contract organised at the point of sale in South
Korea, 2014 17
Total revenues from consumer automotive insurance, warranty, assistance and service contract markets
in South Korea, 2013 18
Total revenues from consumer automotive insurance, warranty assistance and service contracts in South
Korea, 2013 (table) 19
Comparison of the provision of each type of automotive financial service by dealers and manufacturer
brands in South Korea, 2014 21
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial
service in South Korea, 2014 (table) 22
Average number of tied and non-tied schemes organised by dealers for each type of automotive financial
service in South Korea, 2014 23
% split between the different types of creditor insurance policy sold at the point of sale in South Korea,
2014 24
% split between the different types of motor insurance policy sold at the point of sale in South Korea, 2014
25
% availability of road assistance through factory warranties, annual services, extended warranties, motor
insurance, prepaid service contracts and as a stand-alone product in South Korea, 2014 26
% of new and used car purchasers acquiring each type of automotive financial service at the point of sale
in South Korea, 2014 28
Provision of finance and leasing by dealers in South Korea, 2014: provision rate, product sources and
provider share of non-tied partnerships 31
Provision of finance and leasing by manufacturer brands in South Korea, 2014: provision rate, operating
models and weighted provider share of partnerships 33
Implied market shares of new business for finance and leasing in South Korea, 2014 34
Provision of creditor insurance by manufacturer brands in South Korea, 2014: provision rate, operating
models and weighted provider share of partnerships 35
Provision of motor insurance by dealers in South Korea, 2014: provision rate, product sources and
provider share of non-tied partnerships 37
Provision of motor insurance by manufacturer brands in South Korea, 2014: provision rate, operating
models and weighted provider share of partnerships 39
Implied market shares of new business for manufacturer-branded and dealer-intermediated motor
insurance in South Korea, 2014 40
Provision of extended warranties by dealers in South Korea, 2014: provision rate and product sources .. 41
Provision of extended warranties by manufacturer brands in South Korea, 2014: provision rate, operating
models and weighted provider share of partnerships 42
Provision of road assistance by dealers in South Korea, 2014: provision rate and product sources 43
Provision of road assistance by manufacturer brands in South Korea, 2014: provision rate, operating
models and weighted provider share of partnerships 44
Provision of prepaid service contracts by dealers in South Korea, 2014: provision rate and product
sources 45
Provision of prepaid service contracts by manufacturer brands in South Korea, 2014: provision rate,
operating models and weighted provider share of partnerships 46

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