Purchasing a new car by using out a loan is now popular with mainlanders and is probably going to offer a catalyst for shifting chinese people economy towards a growth model depending on consumer spending.
A quarter of Chinese car buyers have borrowed money to finance their purchases, along with the percentage is placed to top 30 percent soon, according to 車貸.
Chen Junjie, 35, a clerk by using a state-owned company in Shanghai, said a vehicle loan would enable him to obtain his hands on his dream car – a Mazda Atenza – much sooner than he would otherwise be able to.
“Paying several thousands of yuan to operate a vehicle my own car a couple of years in front of schedule is not a bad choice,” he was quoted saying. “We are in a new era when folks are inclined towards spending, not saving.”
The car loan market continues to grow exponentially in China in the past decade. The outstanding amount jumped to 670 billion yuan a year ago, in comparison to 5 billion yuan in 2005, consultancy Forward Business and Intelligence said in the report.
The penetration of auto financing in China continues to be lagging far behind developed markets like the U . S . where about 70 per cent of car buyers use loans to finance their purchases.
It was not until 2014 which a soaring variety of mainlanders, particularly those aged between 20 and 40, begun to use auto financing services to buy an auto. Vehicle ownership is viewed as a symbol of luxury and success in the country.
Chen, who earns ten thousand yuan on a monthly basis, plans to borrow 80,000 yuan to acquire an Atenza that posesses a cost of about 200,000 yuan.
“After spending 90,000 yuan to acquire an auto plate in Shanghai, I am a bit short of cash, nevertheless i can readily repay the loans in two years,” he explained. “I believe it’s the best choice to get that loan to fulfil my imagine having a car.
“The monthly interest of 5 to eight per cent is affordable to people much like me. Lending money to us is surely a good business because we borrow the funds to buy things, not bet on stocks.”
Car buyers in China now gain access to loans from banks, auto financing firms and on-line peer-to-peer (P2P) lending platforms.
Global auto giants including General Motors, Volkswagen and Ford are trying to capitalise on auto financing demand in China by expanding their auto loan businesses inside the world’s second-largest economy.
“P2P charges a better interest, nevertheless it offers a substitute for banks and auto financing firms because a few of the buyers are not able to secure that loan from those institutions,” said Steve Shi, a manager with Juchen Auto Trade, a car service firm. “It’s inevitable that some loan defaults occur, nevertheless the bad-loan ratio dexrpky33 controllable.”
China has over 20 auto financing companies using a total capital base of 400 billion yuan. They had issued about 4 billion yuan of asset-backed securities (ABS) products backed by auto loans since June, a move created to hedge against defaults while raising fresh funds for more business expansion.
ABS allows the financing firms to sell off their loans with other investors while freeing up more income that can be lent to customers.
In accordance with Fitch Ratings, the normal cumulative default rate for 汽車貸款 was below 1.5 per cent after June, 2016.
“Overall, the performance of auto-loan ABS hasn’t seen major deterioration despite slowing economic growth,” Fitch said in the research report.
Fitch expects delinquency rates will edge as economic growth is predicted to lower to 6.5 percent this current year, the slowest pace since 1990.