Automobile consumption is a key area in the current round of promoting consumption and expanding domestic demand.

On April 3rd, it was reported that recently, the People's Bank of China and the State Administration of Financial Regulatory Affairs jointly issued the "Notice on Adjusting Policies Related to Automobile Loans" (hereinafter referred to as the "Notice"), which clarifies that financial institutions, under the premise of legal compliance and controllable risks, shall independently determine the maximum loan-to-value ratio for personal traditional fuel vehicles and personal new energy vehicles based on the borrower's credit status and repayment capacity.

Previously, the maximum loan-to-value ratio for personal traditional fuel vehicles and personal new energy vehicles was 80% and 85%, respectively. The "Notice" adjusts this ratio to be determined by financial institutions themselves, with the maximum loan-to-value ratio potentially reaching 100%, meaning that loans can be issued for the full price of the purchased vehicle.

A person close to the People's Bank of China indicated that, in accordance with the State Council's unified deployment on large-scale equipment updates and the renewal of consumer goods, to promote the renewal of old vehicles and support the promotion of automobile consumption, the People's Bank of China and the Financial Regulatory Administration jointly issued the "Notice" to optimize the maximum loan-to-value ratio for automobile loans and increase financial support for the scenario of vehicle renewal.

Advertisement

The maximum loan-to-value ratio can reach 100%.

Automobile consumption financial products and services provide convenience for consumers to purchase vehicles to a certain extent, boost residents' willingness and ability to consume automobiles, and promote steady growth in automobile consumption.

The aforementioned person close to the central bank stated that the People's Bank of China and the former China Banking Regulatory Commission stipulated in 2017 that the maximum loan-to-value ratio for personal traditional fuel vehicles and personal new energy vehicles was 80% and 85%, respectively. The "Notice" adjusts this ratio to be determined by financial institutions themselves, with the maximum loan-to-value ratio potentially reaching 100%, meaning that loans can be issued for the full price of the purchased vehicle. The maximum loan-to-value ratios for commercial traditional fuel vehicles, commercial new energy vehicles, and second-hand car loans remain unchanged at 70%, 75%, and 70%, respectively.

From the perspective of supply entities, the main providers of automobile consumption financial services include commercial banks (automobile loans, credit card installments for car purchases), automobile finance companies (automobile loans), and other financial institutions as well as other platforms (such as microloan companies).

Dong Ximiao, Chief Researcher at China United Research Institute, stated that the main highlights of the "Notice" are in three aspects: First, it clarifies that the loan-to-value ratio for personal automobile loans (including fuel vehicles and new energy vehicles) is determined by financial institutions, with a maximum potential of 100%, further enhancing residents' ability to purchase vehicles through personal automobile loans; Second, it encourages financial institutions to appropriately waive or reduce penalties for early repayment of loans during the vehicle renewal process, which helps to reduce the burden on residents purchasing new vehicles through the "trade-in" process and boosts their willingness to consume automobiles; Third, in response to the previous phenomenon of frequent loan fraud in the automobile loan sector, it calls for strengthened management throughout the entire process of automobile loans, strictly preventing the misappropriation of loan funds, and reducing the potential increase in credit risk after policy relaxation.

Supporting reasonable automobile consumption demand.At the same time, the "Notice" encourages financial institutions to combine new car, used car, and car replacement scenarios to enhance financial product and service innovation, appropriately waive or reduce the penalties generated by the early settlement of loans during the car replacement process, and better support reasonable car consumption demands.

Furthermore, the "Notice" requires financial institutions to effectively strengthen the whole process management of car loans, reinforce pre-loan review and post-loan management, continuously improve the borrower's credit risk assessment system and the collateral valuation system, ensure the safety of loan assets, and strictly prevent the misappropriation of loan funds.

Dong Ximiao believes that the next step for financial institutions should be to deepen the application of financial technology and enhance the innovation and service capabilities of car consumption finance. To promote the steady development of car consumption finance, on the one hand, technical means can be used to improve risk control models and algorithms, and to judge the borrower's repayment ability in a timely and accurate manner based on the consumer's occupation, income, debt, credit status, etc., thereby enhancing the specificity and effectiveness of risk management. On the other hand, by using technical means to conduct targeted analysis of consumer needs, the precision of consumer demand matching can be improved, the scientific and accuracy of credit approval can be enhanced, and issues such as "multiple borrowing" and excessive credit can be reduced.

He also suggests that insurance companies should increase the innovation of car insurance products, differentiate between private family cars and commercial vehicles, properly solve the problems of high insurance premiums and difficulty in insuring new energy vehicles for family use, and resolve the "last mile" problem in the consumption of new energy vehicles. Relevant departments can introduce preferential policies for new energy vehicle insurance, such as providing appropriate subsidies and data support to insurance companies, to support product innovation.

The central bank stated that the next step will be for the People's Bank of China and the State Financial Regulatory Administration to guide financial institutions to implement the requirements of the "Notice," increase financial support, and better support reasonable car consumption demands.