Chinese automobile dealerships see success with financial services

Automobile dealerships are seeing considerable success in China with financial services. As buyers become younger and younger, the importance of being able to offer varied financial services is becoming increasingly apparent to 4S dealerships. In a report appearing on Beijing Business Today, Beijing Yayuncun Automobile Market Vice President remarked that "the perfection of automobile financial services will allow [dealerships] to access more and more customers."

At a FAW-VW 4S dealership, Mr. Wang remarked that he was going to use his 150,000 RMB ($24,285) to buy a VW Sagitar. However, he felt the slightly more expensive Magotan was a little bit more suitable for him. He explained how a dealership salesperson explained that he could first pay 150,000 RMB, and then pay 5,000 RMB ($809.53) a year for one year to purchase a Magotan, a plan which he found very acceptable. There were quite a few customers who were seeking similar plans. By using zero interest and flexible payment plans, dealerships have the ability to attract more and more customers.

With the automobile market growing at exceptionally fast pace and consumers' financial preferences constantly changing, dealerships' financial services have also been transforming. According to statistics collected by autohome.com's research center, the proportion of consumers purchasing vehicles with loans from 2010 to 2013 has increased from 9.3 percent to 17.4 percent. 43.9 percent of those buyers in 2013 were born during the 1980s, while 4.5 percent were born during the 1990s. Both of those figures increased from 2010 as well. These younger buyers are especially receptive to financial services. An owner of a 4S dealership explained: "[While] directly lowering prices can clearly stimulate automobile consumption, for younger buyers a series of appropriate financial services are even more effective." Jia Xinguang, noted automobile industry analyst, agreed that the growing number of younger buyers is definitely a factor in promoting the growth of financial services.

Despite the recent growth in dealership financial services, the Chinese market still lacks behind overseas markets. While the penetration rate for financial services in China have doubled, it still nowhere near the 70 percent to 80 percent penetration rate in overseas markets. The China Association of Automobile Manufacturers predicts financial service transactions to total 525 billion RMB ($85b) by 2025.