China’s Market for Used Car Financing Set to Hit a Trillion Yuan by 2022


China’s market for second-hand vehicle financing is about to reach a trillion yuan, as new data indicates that 40% of used cars in the country are bought on credit.

Figures from the China Automobile Dealers Association indicates that the second-hand car market for 31 provinces in China saw a total of 12.4009 million transactions in 2017, for year-on-year growth of almost 20%, and a transaction volume was over 800 billion yuan.

Analysts see the the market volume for used car financing reaching a trillion yuan by 2022 based on projection from current figures.

China is currently host to several hundred nationwide used car finance companies, while this figure rises to at least a thousand when regional markets are included.

One Guangzhou-based second-hand car dealer said to Xinhua that four out of every ten used cars are purchased on credit, while the sales profit on a second-hand vehicle is currently around 10%.

According to the source the propensity for Chinese consumers to buy cars on credit has brought extra rewards to second-hand dealers, with vehicle financing potentially accounting for a third of all profits.

“A second-hand car with a final sales price of 100,000 yuan will have been purchased by a dealer for approximately 90,000 yuan,” said the source. “The 10,000 yuan price gap is profit for the dealer.

“Taking a 100,000 yuan second-hand car as an example, when processing fees and interest is included, the dealer can also obtain approximately 4000 yuan in profits [from financing.]

“Because there are now many dealers who help consumers to purchase insurance, this is also a source of additional profit…when car loans and car insurance are added together, you can have approximately 5000 yuan in profits.”