The research house estimates that next year the auto-financing industry will grow even faster, by about 20-25 per cent. Competition amongst industry players to become the market leader is expected to remain heated.

Six companies control most of the market through their use of pricing strategies, making it difficult for other companies to gain a foothold, said KRC.

While companies that have been involved in the industry are considered to be at an advantage in terms of experience and established business relations, auto-financing companies affiliated with commercial banks were found to benefit from having access to capital at low rates of interest.

The disadvantage of commercial bank affiliates, however, is that provisioning on loans cannot be counted and deducted as an operating expense to reduce their tax burden, as is done by commercial banks that operate leasing businesses.

Yet this burden may be offset by the company's parent bank as the cost of achieving a share of the market.

For the above reasons, KRC forecasts that pricing strategies will remain the primary competitive tool of the auto-financing sector next year.

Moreover, if the Monetary Policy Committee signals lower interest rates are forthcoming, it is possible that deposit interest rates will also fall, pulling auto-financing rates down to about 3.25-3.50 per cent.

Intense competition in the industry means it is still a buyer's market, with interest rates expected to remain lower than usual for at least the next three years despite there being fewer auto-financing service providers.

Meanwhile, small and medium-sized leasing companies will not be able to compete in the market as long as big players maintain a tight grip on pricing and rely on their edge in management expertise to lower costs or access funding from parent banks, KRC said.