Whenever the insane growth rates of Chinese car sales come up, there is one inevitable comment: ”Wait until credit tightens. Those sales will come crashing down.” My (in the meantime canned) answer: “China isn’t America. In China, people usually buy their car with cash. Financing is rare. Leasing highly uncommon.” Apart from being smart not to pay interest on a depreciating asset, the Chinese have all reason not to lease. Case in point: An email I received today.
It comes from BetterLife Leasing, that dubs itself “The best corporate leasing solutions in Beijing.” I don’t want to see the lesser solutions. BetterLife sent me today’s lease specials. An Audi A6L from 12,700 RMB a month. A Mercedes E-Class from 15,500 RMB a month. In case you don’t know the rate of the Chinese currency off the top of your head: That Made in China Audi A6L would set you back $1,860 a month would you lease it. The Benz would cost you a cool $2,270 monthly. For the base model, 3 year lease. No wonder people prefer cash. The base Audi A6L carries an MSRP of around $47,000, call it $42,000 with the customary Chinese haggling. At $1,860 a month, the car would be paid down in less than two years. You’d have to keep it, pay $25,000 for another year and change, and then give the car back. The Chinese would call you a “250” if you’d do that. In ancient Chinese numerology, it means that you are stupid.
Why are leases so 250 in China? There are no systems for keeping track of residual value. The used car market is a jungle. There is always a stupid laowei who’s slow on the uptake. When I came here six years ago, with my head full of American thinking, I enquired about a lease. My definitely not 250 Chinese assistant said: “Are you nuts? If you don’t want to buy, it’s cheaper to rent by the day with a driver.” Six years later, she’s still right.
In the U.S., more than 85 percent of the cars are bought on credit. In China, less than 10 percent. Credit or no credit: It doesn’t affect the Chinese auto market.
One Audi A6L or…
84* Rolex watches or…
1814* DVDs or…
4233 big Tsingtaos from AllDays.
The choice is pretty obvious: no Audi, and a fine mix of the rest.
*Current Shanghai prices for decent ones. Your mileage, and the quality of your Rolex, may vary.
For the outsiders: That’s per month … Prices in Tong Ren Lu (or what’s left of it) a bit higher …
Maybe it has something to do with Chinese tax policy? Or are their other regulations that leasing lets you skirt that makes it worthwhile?
No. It’s plain stupid.
Part of Chinese culture. They don’t really do house mortgages either. Wait until you have the money, then pay all of it.
With all the money that the government and top corporate brass in China have, I really don’t see the problem. $2,000 a month? No big deal.
How much do the Maseratis go for?
HA HA…250…Chinese always put 8’s in their email or nickname or whatever…I’m going to change a chinese friend’s 8 to a 250 in his nickname, and see what he does…