China will ease car loan policy for first time since 2018 to boost demand

The People’s Bank of China has announced that it will relax the conditions for those seeking to take out a loan to purchase a car, with the aim of promoting car replacements and eliminating the minimum down payment required by the government for consumers financing a new car purchase, Reuters reports.

These revisions, the first adopted by Chinese authorities since 2018, represent the latest attempt by Beijing to bolster consumer confidence in the world’s largest auto market, where aggressive price wars and slowing demand have frustrated both car manufacturers and officials, writes Agerpres.

In a joint press release, the People’s Bank of China and the China Banking and Insurance Regulatory Commission (CBIRC) announced that financial institutions can independently determine the minimum down payment they will accept for auto loans for the purchase of gasoline-powered vehicles and new energy vehicles (NEVs). Before the revision, new energy vehicles (NEVs) were subject to a minimum down payment of 15%, while combustion engine vehicles required a 20% down payment. “Financial institutions should reasonably set down payments, terms, and interest rates for auto loans based on the credibility and repayment capabilities of debtors,” the statement said.

Additionally, regulatory authorities have encouraged financial institutions to reduce or even eliminate penalties associated with early repayment of loans during the process of replacing old cars with new ones. However, analysts believe it is unclear whether the new relaxed rules will be sufficient to lead to a significant increase in demand for expensive items such as cars.

China’s electric vehicle market, the world’s largest, is set to slow for the second consecutive year in 2024 amid worsening economic conditions.