The biggest problem is limited sources of capital, according to China Securities Journal.

The report said most auto leasing companies raise capital through bank loans or selling shares to private investors.

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It said neither approach is optimal because many banks are reluctant to lend because of the complicated procedures to evaluate and register vehicles, while company bosses are not willing to sell their shares for fear of interference in company operations by other investors.

So some are exploring new ways to attract capital such as asset-backed securities, said Song Guanghui, deputy managing director of asset management at Ping'an Securities.

But Gao Chuanyi, head of the Shanghai Leasing Trade Association, noted there have been few instances of asset-backed securities meeting the capital shortfall. Still, he agreed the industry has huge potential.

Other problems include the lack of personal credit information as well as the lack of a sound and uniform appraisal system in China's second-hand auto markets, said an industry insider in an interview with China Securities Journal.

He said leasing companies cannot access the central bank's system of personal credit information and at the same time there are few reliable and authoritative third-party credit rating agencies in China, which has resulted in higher risk control costs.

Lack of a uniform appraisal system in the second-hand auto market is in turn affecting the costs of auto leases, he added.

Aftab at NetSol Technologies called for more legislation efforts to promote the industry's development.