Mobility Disruptors

April 18, 2018

By Acy Min

Auto financing, while common in the United States, is relatively new in China. Historically, financing an automobile has not been very well accepted in China, but the landscape is changing.

Three years ago, my husband went to a car dealership in China to buy a specific model. He did not have enough money at the time to make the purchase, so he opted to buy a similar model with fewer options. Fast forward to 2017. We walked into the dealership with the aim of upgrading to a newer, more advanced model. This time, the salesman introduced us to an auto finance plan, allowing us to purchase an even more upgraded model than we originally had in mind. We were ecstatic.

Auto financing in China has become a huge deal, but what made consumers take such a dramatic step when it came to personal finance? J.D. Power recently conducted a study in China on consumer attitudes towards auto finance. Banks, dedicated auto finance companies and online finance platforms are the three major auto finance channels with which Chinese consumers are most familiar. When consumers were asked how their purchase decisions would be affected by the absence of an auto finance option, 35% stated they would continue to purchase the desired vehicle at the desired option content. However, the majority (53%) stated they would reduce the number of desired options as a result, while proceeding with the intended vehicle. Hence, auto finance is playing an important role in decisions made by Chinese consumers.

Purchase Impact Without Access to Auto Finance—China

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The study found the most important promotional tools to support consumer loans are:

  • Zero interest rate
  • Lower down payment/low monthly payment
  • Promotional prices on the loan/financing lease vehicle

According to the Chinese Passenger Car Market Price Index jointly published by the Chinese Automobile Industry Association and J.D. Power China, the Chinese car market will continue to experience slow growth in pricing in 2018. Affected by the cancellation of the purchase tax preferential policy of small displacement vehicles, car sales forecasts for this year are not optimistic. Despite this, support for auto finance policy will most likely increase in 2018, which is undoubtedly good news for consumers.

The study also shows before buying a car, most consumers in China have some understanding of the financial loan information for the vehicle. Nearly two-thirds (62%) of respondents stated they "have a basic understanding" and 27% said they "understand the necessary information.” There is an increased number of channels through which consumers can obtain information on financial loans as well as an increase in diversification. The study found the three main types for accessing auto financial information for consumers are:

  • Automobile web portals 
  • Official websites/WeChat accounts of auto makers 
  • Dealership shop advertising, such as shop banners, posters, etc.

Even with the emergence of "car supermarkets," online car shops and other new purchasing channels, the majority of consumers (82%) still choose traditional dealerships to buy cars, with just 7% claiming to buy cars on online trading platforms.

As China’s economy continues to boom, the auto finance industry will be growing faster in the coming years, propelled by the internet and by the ability to finance used cars. In the future, most Chinese consumers will seek an auto finance plan on the road to purchasing their dream car, including my husband and me.

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Acy Min is a marketing professional at J.D. Power Asia Pacific Operations. She is interested in auto marketing under the digital landscape.

The information contained herein has been obtained by J.D. Power from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, J.D. Power does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from use of such information. 

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