Banks cautious in car loans
10/9/2003 15:44
Local banks are more cautious in extending loans to car buyers due to
the successive declining car prices and the larger risks of failure to
repay, the Youth Post reported today.
The four largest state-owned banks,
including the Industrial and Commercial Bank of China, Bank of China, China
Construction Bank and
Agricultural Bank of China, extended a total of 140.9
billion yuan (US$17 billion) in car loans by the end of July this year. This
accounted for only
20 percent of the total car purchases in the first half
of this year.
Chen, from Jiangsu Province, runs his own business and has
bank savings of 500,000 yuan. But his income is not stable. Chen wanted to buy a
car
for his daughter.
"I can buy a car by paying cash, but I am
inclined to purchase it in mortgage loans," Chen said. However, Chen was told
that he couldn't get
the loan as he failed to display his income
certificate.
Car buyers from outside the city cannot get car loans in
Shanghai unless they are legal persons of companies and they must offer property
housing certificates, according to some local car dealers.
"Only 20
percent of my clients have got mortgage loans," said a seller with a Honda car
dealership.
"We are always concerned about repayment. Compared with real
estate loans, car loans have more risks," said local banker Liu. "People cannot
sell cars through regular channels if they haven't repaid their loans, but
they can sell them on the black-market, which is out of our
control," Liu
said. Another local bank only handles loans of mid and high-end cars in order to
lower risks.
Moreover, the successive car price drop has depreciated the
value of the mortgaged cars, Liu added. "Car loans valued at 650 million yuan to
date, only account for three percent of our total individual loan business,"
said Tan Zhimin, spokesman with the individual business department
of the
Agricultural Bank of China' Shanghai branch.
Wendy Zhang/ Shanghai Daily news
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