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Auto finance service sector 'big cake'

By Hao Zhou (chinadaily.com.cn)
Updated: 2008-03-25 17:17

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As US-based GMAC Financial Services, one of the world's leading automotive financing companies, posted a $2.3 billion loss in 2007, the Chinese automobile market is growing. It added two more automotive financial service providers, Fiat Automotive Finance Co Ltd and Dongfeng Nissan Auto Finance Co Ltd, at the beginning of 2008.

Nine global auto giants including General Motor, Toyota and Volkswagen, have so far opened auto finance wings in China. However, compared with a total sales volume of 8.8 million vehicles in the Chinese market last year, auto finance firms' results were discouraging.

Beijing, for example, saw more than 400,000 new vehicles sold last year, but less than 10 percent of customers chose to pay by installment. According to Sinotrust Marketing Research and Consulting Ltd's statistics, only 6.6 to seven percent of Chinese customers bought cars via loans last year.

"Although the number of automotive finance firms is increasing, the auto finance sector contributes less than five percent of the auto sales, because most Chinese customers prefer lump sum payments," said an analyst from Guotai Junan Securities Research Institute.

Of the 10 interviewees, most of them attributed their unwillingness to buy car via loans to "high loan interest," "huge down payments," "haunting return deadlines," "complex loan procedures," as well as "lowering auto prices."

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The full text is available in the March Issue ofAuto China