Big Reform for Auto Loans, New Measures Soon out

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Last updated at: (Beijing Time) Wednesday, February 19, 2003

Big Reform for Auto Loans, New Measures Soon out

The new measure is expected to further relax restrictions in lending scope, quantity, modes of loan release, lending rate and the percentage of the principle payments. The initial estimated payment amount stipulated in the new regulation will be no less than 10 percent of the car price and will vary according to vehicle make and model.

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the People's Bank of China will recently map out "Measures for Management of Personal Loan for Autos", which is now underway sorting for opinions from all walks of life and will be brought out recently. As learned the new measures will replace the old "Measures for Management of Loans for Auto Consumption" put into effect in 1998.

More attention on personal auto-loans

The great difference of the new measures as against the old executed before pays more attention to personal auto-loans with a clear-cut definition made that the borrower is referred to a natural person with fully civil behavior but not to any corporate person.

According to statistics, the year of 2002 witnessed some 20 percent of consumers buying car on loans. The initial eleven months saw bank loans to increase by RMB 65 billion-yuan in total as against that at the beginning of the year. However, that from 1998 to 2001 only saw an increase of RMB 42 billion-yuan in all. As compared to the 70 percent loan-consumers in other countries of the world there is still a big room to manoeuvre in the domestic market for personal auto-loans in the years to come.

More precise quotas for personal auto-loans

In the "measures" enforced in 1998, there is no definite regulation as for how much to be loaned in total. This caused, to a great extent, the "bound-up type" of loan, making the dealers, installment companies and banks to grant loans in line with the net-price of the car or loans consisting of the price for buying the car, additional-tax and fee and premium putting together. And this has made low the ratio of the initial payment while banks have to face greater risks.

The new "measures" give an explicit definition to the auto-loan in total, for example the car-price as total auto-loan for the borrower (not including all sorts of additional taxes, fees and premium, etc.) so as to avoid the "bound-up type" of loans.

The new "measures" enact a uniformed ratio of initial payment, namely 10 percent and this is to be calculated and carried out strictly in accordance with the purchased car-price (not including any taxes and fees in it).

To buy insurance necessary?

We should say, there is no problem as to the buying of insurance for making loans in the old "measures". However, in the actual operation, quite a number of installment companies and dealers collected only premium for the car with no insurance for auto-loans to be made for consumers. The new "measures" will probably make it as stipulated that to handle the relevant insurance concerning personal auto-loans will be decided on consultation between the two parties, the lender and the borrower. The lender shall not force or force in disguised form the borrower to buy relevant insurance for auto-loan.

Besides, the new "measures" will make a clear definition as to the longest period for personal auto-loans, especially the longest term for loans used for buying vehicles in production. And furthermore, there is an upper and lower limit to the interest-rate for personal auto-loans.

By People's Daily Online

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