Tighter car loans in Beijing, but cash still king for buyers

Applying a loan for a car is not as easy as before in China. [Provided to China Daily]

The lack of liquidity at domestic banks is making it harder to get a car loan in Beijing, but that is likely to have minimal impact on the mostly cash market.

An attendant of China Merchants Bank told China Daily that applying for car loans in Beijing is now more difficult than in other cities.

Applicants must now have real estate worth at least 1.5 million yuan ($245,901) in their own name or owned by a direct relative, she said.

If applicants do not have a Beijing hukou - permanent residency - they must provide proof of paying individual income tax and social insurance for five consecutive years.

The bank has also added requirements on applicant jobs. Preferred professions include doctors at noted hospitals, teachers at public schools or the staff at government departments with at least two years of work experience.

The customer service department at the Industrial Bank said it seldom offers car loans. The bank suggests clients use installment plans at car dealers or pay by credit card.

The Beijing Daily newspaper quoted a staff member at the Zhongguancun branch of ICBC saying it has temporarily stopped issuing car loans.

The report said the Zhongguancun branch of the Bank of Beijing has also suspended the service.

But that does not seem to bother many dealers, especially for luxury nameplates.

According to an office worker surnamed Zhu who works in the financing department at BMW's Chendebao dealership near the Beijing Capital International Airport, the tighter car loan policy does not make any change to the dealer's business.

She said if customers can hand in needed documents in time, the loan will soon be approved.

Industry insiders say that unlike some other goods, car purchase is flexible because customers have a wide range of options.

In the past when car loans were easier to get, a customer with 200,000 yuan could choose a 300,000 yuan model and borrow the rest from a bank.

But that buyer can still get a good car priced at 200,000 yuan without the loan.

Despite some concerns that the tightening car loans will hit mid-class vehicles, Lin Huaibin, an analyst with IHS Automotive, said there will not be a big impact.

He noted that there are very limited statistics about which customer group uses car loans and which pay by cash.

But he noted only 15 percent of car buyers in the country apply a loan. The rest all pay all at once.

He added over the short term, sales at some automakers and dealers may see a temporary decrease, but the impact is likely to be short lived.

"The country encourages consumer loans, so tighter car lending is not expected to last long," he added.