China’s central bank has announced revisions to car loan policies aimed at promoting auto trade-ins and scrapping government-set minimum down payments for consumers financing new car purchases. These revisions, the first since 2018, seek to stimulate consumer confidence in the world’s largest auto market amid a competitive price war and slowing demand.
Financial institutions now have the autonomy to determine the minimum payments accepted on personal auto loans for both gasoline-engine cars and new energy vehicles (NEVs). Previously, NEVs were subject to a minimum down payment of 15%, while internal combustion vehicles required a 20% down payment.
The revised policy emphasizes reasonable determination of down payments, terms, and interest rates based on borrowers’ creditworthiness and repayment capabilities. Additionally, financial institutions are encouraged to reduce or eliminate penalties for prepaying loans during the process of trading in old cars for new ones.
Despite these efforts, analysts caution that China’s initiatives to boost auto sales through reduced down payments may face challenges due to ongoing price wars and consumer cautiousness.
Source: Reuters