Chinese Car Buyers Opt for Auto LoansEssay Preview: Chinese Car Buyers Opt for Auto LoansReport this essayChinese car buyers opt for auto loansCar loans in China are soaring as automakers captive loan operations make financing easily available.GMAC-SAIC Automotive Finance Co., for example, generated $944 million in auto loan originations in the last three months of 2010, up 97 percent over the year-earlier period.
Thats a huge increase for a market that still relies primarily on cash transactions.Last year, only 10 percent of car buyers in China received loans to purchase a car — only a fraction of the 80 percent rate in developed markets, said Susanne Gehrling of GMAC international operations.
So there is plenty of room for growth for lenders such as GMAC-SAIC Automotive, a three-way joint venture set up in 2004 by Ally Financial Inc., Shanghai Automotive Group Finance Corp. and Shanghai General Motors.
Ally Financial, an independent bank, was formerly known as GMAC Inc.Chinese borrowers typically favor a 36-month loan. Young car buyers are especially willing to seek financing, Gerhling says.“GMAC has seen an increase in use of auto finance as more young buyers come into the market who are more aware and open to financing,” she notes.Car loans initially gained a foothold in Chinas prosperous coastal cities. Now, car buyers in 2nd and 3rd-tier cities are seeking financing, too.“These areas now comprise our fastest growing geographical segment, as customers in these regions aspire to have cars,” Gehrling says.Luxury car buyers are more open to obtaining loans than their mass-market peers, says Jenny Gu, an analyst with J.D. Power and Associates.Gu says 17 percent of Mercedes-Benz car buyers got loans last year, compared with 10 percent of all car buyers.
” In 2006, 35 percent of all U.S. car buyers in this country were younger. And by 2010 nearly 30 percent of new car buyers in developed and U.S. countries lived in the United States, according to the latest National Association of Realtors, an industry research organization based in Cleveland.Gu points to U.S. auto loans as one reason for rising interest rates compared to Asian peers,⃪ the data show that in some cases, more younger buyers are in the auto finance business than in other groups.The growth in auto loans has been particularly notable among younger U.S. consumers.U.S. consumers in all categories of homes have been the biggest buyer of a range of cars and SUVs for more than 40 years. The number of car customers who have an active vehicle loan has risen 30-fold between 1970 and 2009, according to a 2015 survey of American vehicle lending.In May, a new report from the California Association of Realtors found that the auto industry was also a growing vehicle and loan business in 2014, surpassing a decade ago when 70 percent of homes had auto loans.CRAZY BRINGING $4,000 or more for Car Loans*–Founded in 1956,* a leading lending institution focused on providing affordable home loans to middle-class families. Car loans tend to be larger in metropolitan areas where a family has income, and larger across the country where home equity can be significant.*Established in 1955,* Car Loan Company Incorporated.In addition to providing auto loans and mortgage financing facilities to those who qualify, Car Loan Co., based in Beverly Hills, Calif., is the first American financial institution to offer in-home loans that cover all types of transportation, financial, property, and business expenses.†The Car Loan Association of California offers a wide range of auto financial products including insurance, car insurance, vehicle leasing, financing, insurance, and property and vehicle loans. Car Loans, Inc., the nation’s largest lending institution, provides some 70,000 residential and commercial loan options across the country and works on ways to improve customer service, customer performance, and service to consumers, including car financing. A Car Loan program to buy autos is one of Car Loan’s more significant features as it helps students build lasting relationships with their college counselors and friends. Car Loan’s parent company Car Loan & Car Loan International offers auto financing as part of its investment in The Trust Bank, a national auto lending provider. Car Loans Inc. does not take principal deposits of debt to finance its lending programs.†The current car loan market is set to become more complex after the U.S. Federal Reserve hikes interest rates. Car loan originations and loans could be a major source of new vehicle lending for homeowners next year, said Steve Litchfield, managing director, CAR Loan International. The Federal Reserve is targeting a 10-year rate hike in early September as it tries to curb rising interest rates.Since the beginning of the car loan boom, borrowing costs have been shrinking. The average consumer spends more than $100 on a car per month, while the typical consumer spends $1,000 per month, according to Consumer Reports. By 2030, car purchases and vehicle inventory will triple — and as consumers age or get older, they will spend more, said Stephen Storch, chief investment officer