China Used-Car Market Poised for Boom Following New-Car Sales Surge | Auto Finance News | Auto Finance News

China Used-Car Market Poised for Boom Following New-Car Sales Surge

  • William Hoffman
  • September 6, 2018
  • Asia

Aaron Lei, senior director and analytical manager of structured finance ratings at S&P Global Ratings.

SHANGHAI The used-car market in China is poised for growth, but there are risks to overcome along the way, according to several speakers at the Auto Finance Summit Asia 2018 today.

Secondhand car sales were up nearly 20% year over year to 12.4 million units, but the majority of those deals continue to be cash transactions, said Aaron Lei, senior director and analytical manager of structured finance ratings at S&P Global Ratings.

But major hurdles remain to match U.S. used-vehicles sales volumes that totaled 42 million units last year or to more efficiently turn over the 28 million Chinese new cars sold annually.

Specialized used-car dealers have started to crop up in China, but the market has to contend with restrictions on the registration of vehicles shipped across Chinese provinces, not to mention the lack of a unified and comprehensive valuation system for cars on the road.    

David Gaynoe, vice president of global sales and marketing for Cox Automotive’s RMS Automotive, is one of the players in the space helping to form that infrastructure. Both physical and online auctions have started to come online across China with proper inspections to build vehicle histories, he said during a presentation at the summit.

Leasing provides an opportunity to build those values, as well, because the vehicles come back to the dealership after the term has expired.

“Because captives are attached to the OEM, they are going to have the most information on the vehicle and the consumer,” Gaynoe said. “It’s a controlled data set where you have motivations by the captive to maximize that portfolio, but also have the consumer retention piece.”  

There’s also room for lenders to offer lower down payments on used cars and to increase loan-to-value ratios to help get consumers in these used vehicles. On average, Chinese consumers are putting down 70% on used-vehicle loans, Lei said.  

“The fact is that when you sell as many new cars as you have in China in the past five to seven years, it’s only going to lead to a massive used-car marketplace,” Gaynoe added. “We’re excited to get in early on that and shape what it’s going to look like.” 

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