Eased restrictions on cross-province trade are spurring higher used-vehicle values in China, according to a new KPMG report.
China has more than 300 million vehicles on the road, but regulations limiting transportation and sale of cars across province borders had restricted the free flow of supply to areas with the greatest demand and lowest supply. Though restrictions were lifted in 2016, local governments have been slow to adapt to the new rules. Now, sales are starting to pick up, improving residual values nationwide, according to KPMG.
Used-vehicle values will also be propped up by new electronic information archive systems that will improve information transparency, the report stated. For example, Ford Credit
China uses a proprietary system to evaluate car values, a spokeswoman told Auto Finance News.
These developments come at a time when OEMs and lenders are turning to leasing to boost slowing new-vehicle sales. KPMG estimates lenders will originate 981,000 leases across China this year, compared with 768,000 in 2017. By 2026, leasing could account for 8 million units per year.
China’s leasing product is different than a typical U.S. lease; in China, consumers make a smaller down payment but are required to buy the vehicle at the end of term, according to KPMG.
“Leasing will assist OEMs to increase customer stickiness, attract more customers, and improve EV sales,” the report stated.
