Getting a new car if you take out that loan is becoming increasingly popular with mainlanders and will likely supply a catalyst for shifting the Chinese economy towards a growth model depending on consumer spending.
A quarter of Chinese car buyers have borrowed money to finance their purchases, as well as the percentage is scheduled to top 30 percent soon, according to 車貸.
Chen Junjie, 35, a clerk by using a state-owned company in Shanghai, said an automobile loan would enable him to have his hands on his dream car – a Mazda Atenza – much earlier than he would otherwise be able to.
“Paying several thousands of yuan to operate a vehicle my very own car a couple of years before schedule is not a bad choice,” he stated. “We are in a whole new era when folks are inclined towards spending, not saving.”
The car loan market has expanded exponentially in China during the past decade. The outstanding amount jumped to 670 billion yuan a year ago, in comparison with 5 billion yuan in 2005, consultancy Forward Business and Intelligence said inside a report.
The penetration of auto financing in China continues to be lagging far behind developed markets including the Usa where about 70 per cent of car buyers use loans to finance their purchases.
It was not until 2014 which a soaring amount 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 nation.
Chen, who earns 10,000 yuan a month, wants to borrow 80,000 yuan to acquire an Atenza that comes with a asking price of around 200,000 yuan.
“After spending 90,000 yuan to get a car plate in Shanghai, I am just a little short of cash, however i can readily repay the loans by two years,” he was quoted saying. “I believe it’s the correct choice to get a loan to fulfil my dream about getting a car.
“The monthly interest of 5 to eight percent is affordable to the people 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 have accessibility 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 from the world’s second-largest economy.
“P2P charges an increased monthly interest, nevertheless it offers an alternative choice to banks and auto financing firms because some of the buyers are unable 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 greater than 20 auto financing companies with 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 as of June, a move built to hedge against defaults while raising fresh funds for more business expansion.
ABS allows the financing firms to offer off their loans with other investors while freeing up more money which can be lent to new business.
According to Fitch Ratings, the normal cumulative default rate for 汽車貸款 was below 1.5 per cent at the end of June, 2016.
“Overall, the performance of auto-loan ABS hasn’t seen major deterioration despite slowing economic growth,” Fitch said within a research report.
Fitch expects delinquency rates will edge up as economic growth is expected to lower to 6.5 % this year, the slowest pace since 1990.