The car loan program launched by banks and car financing companies attracts potential buyers in Nanjing, Jiangsu province. (Photo/China Daily)
More people are buying cars with loans in China, according to a J.D. Power survey, making car financing a growing source of revenue for car dealers in the world's largest auto market.
The percentage of new vehicles purchased with loans rose to 64 percent from 57 percent in the luxury segment and to 57 percent from 49 percent in the mass market segment.
Car financing generated 10 percent of dealers' revenue in 2016, which was just 2 percent in 2011, according to the company.
The findings were based on a survey conducted by J.D. Power China of 2,377 dealers, representing 47 vehicle brands across 84 cities throughout China between December 2016 and March 2017.
"Compared with the United States, auto financing in China is still relatively underdeveloped," said Winston Xue, general manager of financial services at J.D. Power China.
"But it is growing significantly in China, and the young are more inclined to purchase cars with loans."
Statistics from the China Auto Dealers Association show that auto finance had a penetration rate of 81 percent in the US in 2014.
Xue said the situation presents an opportunity for lenders and dealers to offer products that meet the needs of a growing population of car buyers looking to finance their purchases.
The rise has also become a key driver of Chinese car dealers' overall satisfaction with their lenders, according to the J.D. Power survey.
Specifically, carmakers' financial companies are doing a better job than banks. Out of the top nine financing institutions with which dealers are most satisfied, only two are banks.
Having competitive financial products, including easy application processes, is the top criteria for dealers to select a retail credit lender, according to Xue.
Overall, carmakers' financial companies continue to lead with a market share of 65 percent, up 7 percent from 2016.
Chinese and international carmakers had established 25 auto finance institutions in China as of the end of 2015, with their combined revenue totaling 900 billion yuan (2.15 billion), Wang Xin, CEO of consulting firm Frost & Sullivan China told China Business News.
Xue said: "As more auto finance companies enter the market and offer diverse products, consumers will have more choices and dealers' satisfaction is expected to increase. That's a promising 'three-win' prospect for consumers, dealers and lenders". He said dealer satisfaction has been on the rise for two consecutive years.