"IONIQ 5 for Just 140,000 Won a Month"... Deferred Installment Plans Surge Amid Sluggish Domestic Sales of Korean Cars

Hyundai and Kia Defer up to 60% on EVs;
Renault and KGM Also Offer Residual Value Guarantees
Domestic Car Registrations Down 6.7% Through August Amid Imported Brands' Surge
Deferred Principal Still Accrues Monthly Interest;
Lump-Sum Repayment and Return Conditions Require Caution

"You can drive a new car for just 100,000 to 200,000 won per month"

This is a deferred installment promotion currently displayed on official websites of major domestic automakers. As domestic car sales stagnate and competition from imported brands intensifies, manufacturers continue to attract customers by offering financial products that reduce the initial payment burden through deferred-payment plans.

Hyundai EV Burden Down Promotion. Screenshot from Hyundai's official website

According to the automotive industry on September 15, Hyundai Motor and Kia are offering aggressive financial programs for their main electric vehicle lineups this September, allowing up to 60% of the vehicle price to be deferred until maturity. Through the "Hyundai EV Burden Down" promotion, Hyundai Motor is granting buyers of the IONIQ 5, IONIQ 6, and Kona EV a low annual interest rate of 2.8% with a deferral rate of up to 60% over 36 months. For the Porter EV, the program offers a 2.8% interest rate and a 50% deferral rate; for The All-New NEXO, 1.8% for 39 months with a 45% deferral rate.

Kia has countered with its own "residual value guaranteed deferred payment" product. For new EV3 and EV4 models, the plan applies a 3.6% annual interest rate over 36 months and allows up to 60% of the price to be deferred, easing the monthly payment burden.

Deferred installment programs allow customers to postpone repayment of a certain portion of the vehicle price (typically 40–60%) until three or four years later at maturity. During the contract period, only the interest on the deferred sum and the remaining principal is paid monthly, lowering the initial monthly payment burden. For customers reluctant to make a large upfront payment, this lowers the threshold for car purchases.

Mid-sized firms have also joined the deferred and residual value guarantee marketing push. Renault Korea is operating a program for customers buying certain models such as the Grand Koleos, guaranteeing 65% of the used car value after three years of ownership (76% if resold within one year, 51% within five years). KGM is also offering a "smart deferred installment" program for models such as Torres and Actyon, allowing up to 53% of the vehicle price to be deferred and reducing monthly payments.

The primary reason automakers are running such extremely low monthly payment deferred finance programs is the sluggish domestic car market. According to provisional statistics from the Korea Automobile Mobility Association (KAMA), the number of domestic vehicle registrations between January and August this year was 839,869, a decrease of 6.7% year-on-year. Meanwhile, registrations for imported cars by brands like Tesla and BYD, which have strong price competitiveness, surged 26.3% during the same period, quickly taking over the Korean market.

The issue lies in the downside of deferred installment plans. While the scheme delays the repayment of the principal, the total principal amount itself does not decrease. For example, even if 60% of the vehicle price is deferred, interest is still charged every month not only on the remaining 40% that is paid off in installments, but also on the entire deferred 60% principal. Because of this interest-only structure that does not reduce the principal, the total interest paid during the contract period could be higher than with a standard equal principal and interest payment plan. In addition, after the deferral period ends, residual value guarantee benefits are only available if the customer purchases another vehicle from the same manufacturer, and conditions such as mileage limits and accident history requirements for returns also apply.

Even if customers return the vehicle to offset the deferred payment, the conditions can be strict. To receive the residual value guarantee, customers who entered into a deferred installment plan must purchase another new car from the same manufacturer in the same or joint ownership name after returning the vehicle. In the case of Renault Korea, if the contractual mileage (15,000 km per year) is exceeded, a depreciation penalty of 200 won per extra kilometer applies; if the average annual mileage exceeds 30,000 km, the vehicle is excluded from the guarantee entirely.

Hangoo Lee, distinguished professor at Namseoul University, commented, "Vehicle prices keep rising while consumer purchasing power does not, so manufacturers are using deferred payment programs to boost sales and retain customers. Although the initial monthly payment is low, the overall amount the customer ends up paying is the same, so in reality, it is akin to giving with one hand and taking with the other."

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