Car loan services in China are expected to grow significantly in the next three years, industry consultancy J.D. Power said Thursday, a trend that is contributing increasingly to dealers' profits.
About 34 percent of Chinese consumers for mass market cars will buy their vehicles with loans by 2018, compared with 15 percent in 2015. For premium cars, the figure will jump to 45 percent by 2018 from 31 percent in 2015, the consultancy said at a press conference in Beijing.
Auto finance has become an important contributor to dealers' profits as growth in new car sales in China is slowing. About half of dealers are losing money, analysts said.
Financing services for each premium car could bring an extra profit of about 6,000 yuan ($914.76) for dealers, while for a mass market car the figure could be 3,000 yuan, showed a report released by J.D. Power on Thursday.
The commission from car loans accounted for around 8 percent of dealers' profits in China in 2015, Yang Xu, senior manager of auto finance at J.D. Power China, said at the press conference.
Auto finance still has large scope for growth in China as the penetration rate is low compared with levels in developed economies. About 56 percent of consumers in the US buy cars with loans, and US auto finance firms are much more efficient than their peers in China, according to the report.
Leasing is also a new activity in China, where only about 2 percent of consumers use such services, compared with 28 percent in the US, said experts at the Thursday press conference.
Car leasing will serve as a major driver for auto finance as young consumers are increasingly open to the idea of renting a car. However, there are still some policy obstacles, industry insiders said.
Car plate restrictions in major cities like Beijing and Shanghai are a big obstacle for leasing firms, which find it hard to get plates, He Changjin, general manager at All Trust Leasing Co, said at the press conference, calling for policy support from the government.
