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Private Consumers Able to Lease Cars

Posted May. 24, 2005 03:30,   


Renting Period Must be Longer than 20 Percent of the Car’s Service Life-

When one borrows a car from financial companies specializing in the loan business, the rental period must be longer than 20 percent of the car’s service life (the period during which the car is able to be used). In other words, only long term rental is possible. One cannot rent a car for less than a month.

For example, if car A’s service life is five years, then one will have to rent it for at least one year (five years × 20 percent).

An official at the Financial Supervisory Commission said, “We have decided to allow only long-term rentals for financial companies in consideration of the car rental services which already exist.”

Consumers must select the rental company, the type of car, go through an inspection of personal credit status, decide the rental period, and decide on the fees before making an agreement.

The contract process is similar to that of the car rental service, but the biggest difference is that these companies check whether one can pay the money based on the consumer’s credit information.

Larger Selection of Cars Available-

Samsung Card, Hyundai Card, Daewoo Capital, Orix Autolease, and City Lease are currently preparing for the car rental business.

Financial companies view the business prospects of this industry as bright because the demand for automobiles increases annually. Last year, the amount of money spent on cars bought by financial companies for auto leasing (long-term rental business for corporate customers) amounted to 1.6831 trillion won, up by 55.2 percent from the previous year (1.0844 trillion won).

Credit Finance Association’s head researcher Lee Bo-woo predicted, “If the financial companies entering the used car industry manages to meet the consumer’s needs by utilizing their customer information, we will be able to see a clear difference on preferred rental companies and the rest.”

On the other hand, some are worried that the credit card and financing companies, which faced liquidity problems after the financial crisis, may become unstable again if they try to over-expand their businesses.

One source in the Ministry of Finance and Economics said, “It is important for financial companies to expand their base for profits. We will allow them to expand their business, but we will strengthen our supervision.”

Meanwhile, the government has decided to officially allow credit card companies to offer other additional services such as insurance agency, sales of tourist packages, and lottery, mail-order sales, and issuing credit cards. However, services to introduce bank loans, which were requested by financial companies, were not added.