According to authoritative statistics from Sinotrust, 80 to 85 per cent of US consumers finance private vehicle purchases with loans. The ratio among German and Indian citizens are 70 per cent and 60 to 70 per cent respectively. However, only 5 to 10 per cent of Chinese car owners choose to borrow money to make their purchases.

Since October 1998, when commercial banks were given the right to grant car-consuming loans, only several billion yuan has been lent every year. And even though the interest rate for loans was lowered for the eighth time in February of this year, the situation has not improved substantially.

Why? With a big question mark in mind, Sinotrust recently surveyed 206 interviewees at main car trading centres in Beijing.

The survey shows that more than half of those vehicle buyers (55 per cent) choose to pay out the money once and for all, while the remaining 45 per cent are interested in instalment plans.

According to those who are opposed to instalment plans, interest is a big obstacle against adopting such a payment plan. And although the interest rate has been lowered substantially, consumers still hold back from such a choice.

In contrast to domestic car producers, foreign vehicle giants have adopted a flexible strategy to stimulate consumers' desire. US-based Ford and General Motors provided "zero interest rate" loans to consumers last year in the United States, which immediately sparked car purchases.

Another obstacle keeping buyers away from instalment plans in China is the complicated procedure that is required, according to Sinotrust's survey.

"It is really troublesome to find a guarantor and to follow so many complicated procedures," one interviewee said.

The final reason why most people do not favour payment via instalments is that Chinese citizens are still not used to the idea of borrowing money.

Sinotrust's survey also found that well-paid singles more readily embrace instalment plans, while married couples are more reluctant to owe money.

(Business Weekly July 10, 2002)