From "Price Wars" to "Financial Wars" - Automakers Battle Over Low-Interest Loans

Securities Times Reporter Mei Shuang

“Only 1,918 yuan a month, and you can buy a new car with just a daily coffee budget.” The cash discount posters once popular in auto sales promotions are quietly being replaced by financial plans that are precise down to daily installments.

From new car manufacturers to joint ventures, more and more automakers are breaking the traditional 1- to 5-year car loan cycle, launching long-term, low-interest financing options of 7 or even 8 years. Behind the allure of “low monthly payments,” there is a complex financial picture— for automakers, it’s a clever strategy to maintain pricing systems and lower purchase barriers; for consumers, it involves precise considerations of new energy vehicle residual value and personal financial cycles.

During visits to offline new energy vehicle stores, the Securities Times reporter found that “7-year low-interest” plans appear on many brand advertising boards. Industry insiders told reporters that low-interest auto loans are a trend, helping to tap into more consumer demand. Consumers should pay attention to the implementation mode of these low-interest loans and the hidden costs of purchasing.

Low-interest loans becoming mainstream

By 2026, the main battleground for new energy vehicle brands has shifted from terminal discounts to financial services. In early January, Tesla launched a 7-year ultra-low-interest purchase plan, quickly triggering a chain reaction in the auto market.

According to incomplete statistics, more than 20 major automakers have joined this “financial battle,” extending car loan periods to 7 or even 8 years, with annual interest rates generally between 2.5% and 5%. Visiting new energy vehicle stores, the reporter found that “interest-free, low-interest, zero-down-payment loans” have replaced price reductions as the key phrases on store posters. Some brands also offer different financial plans for different models.

“Since the launch of the 5-year zero-interest and 7-year ultra-low-interest policies, store foot traffic has increased significantly. Out of 20 customers, 19 are opting for the 5-year zero-interest plan,” a salesperson at a Tesla store in Pudong, Shanghai, told the reporter. Recently, transaction volumes in stores have been notably higher than during the Spring Festival period, with more consumers choosing the 5-year zero-interest option than the 7-year ultra-low-interest plan.

“It’s all driven by Tesla,” said a salesperson at NIO’s Shanghai store, which also launched a promotion offering “7-year ultra-low interest, with a down payment starting at 38,000 yuan.” The salesperson added that if other brands lower purchase thresholds, not doing so would be equivalent to letting potential customers flow to competitors.

Zhang Xiang, a researcher at the Automotive Industry Innovation Center of North China University of Technology, believes that automakers seizing the opportunity to introduce long-term low-interest financing schemes creates multiple benefits. For consumers, ultra-long-term low-interest installment plans mean lower purchase barriers and less repayment pressure, making them suitable for young buyers with limited budgets. For automakers, this promotional approach can boost sales, reduce inventory, increase revenue, and use the acquired liquidity for operations.

“Price wars are direct and aggressive, trading profit for volume, which can harm brands and loyal customers; financial wars are more like a gentle cut—using low-interest, long-term loans to lower entry barriers, locking in customers before prices are cut,” said a representative of a new energy vehicle brand. Since this year, the vehicle purchase tax for new energy vehicles has shifted from full exemption to a 50% reduction, and automakers hope to mitigate the impact of policy rollbacks through financial means. The “financial war” of attracting consumers with low-interest, long-term loans has inevitably become a mainstream promotional tactic in the auto market.

Behind the “low monthly payment” bills

Under the aggressive marketing campaigns, many consumers are swayed by slogans like “interest-free” and “ultra-low interest.” Mr. Wang, who lives in Minhang District, Shanghai, plans to buy a new energy vehicle. He calculated: if the car costs around 250,000 yuan, a traditional 5-year bank loan would require a down payment of over 50,000 yuan and a monthly payment of about 4,000 yuan. But with a 7-year ultra-low-interest plan, the monthly payment drops to less than 3,000 yuan, just within his comfort zone.

However, behind these seemingly attractive “low monthly payments” lies a hidden, often overlooked total cost. “Consumers are often attracted by the appearance of low monthly payments but rarely consider the total interest paid over the extended loan period,” said Wu Kun, an automotive industry analyst. “They see the ‘0 interest’ slogan on posters but forget to check the fine print at the bottom, which says ‘for reference only; down payment and monthly payments may vary; final terms depend on actual approval and contract.’”

An industry insider explained that although low-interest loan policies from automakers appear similar on the surface, their funding channels and ownership structures differ significantly, mainly falling into three modes: direct bank loans, auto finance companies, and leasing.

The direct bank loan model involves cooperation between automakers and banks, with banks providing the funds and automakers offering interest subsidies to lower rates. Consumers sign a “Car Mortgage Loan Contract,” with vehicle ownership remaining with the consumer from the start, only mortgaged to the bank. This model has clear legal relationships and stronger consumer rights protection.

The auto finance company model involves a subsidiary of the automaker’s own finance company, often tightly integrated with sales, with more flexible approval processes and relatively shorter loan terms.

Most current ultra-low-interest, long-term schemes, however, are based on the leasing model. This involves a leasing company affiliated with the automaker providing the loan. Before the loan is fully repaid, the vehicle ownership belongs to the leasing company; consumers only have usage rights, and ownership transfers only after all payments are settled. “This model can extend the loan period, but during repayment, consumers are only lessees and may face vehicle ownership issues,” warned the industry insider.

Wu Kun advised consumers to carefully check whether the contract is a loan or a lease, and to request a comprehensive cost breakdown including interest, insurance, and fees to understand the total expenditure. Before placing an order, consumers should clarify whether there are bundled financial services and understand rules for early repayment.

Automaker strategic shifts

The “financial war” since the beginning of the year appears to be a contest of interest rates, but in reality, it’s a test of automakers’ financial capabilities. “Who is truly subsidizing with real money, and who is just playing with words? The market will respond,” said a representative of a joint venture automaker. A 7-year ultra-long-term loan also involves greater uncertainty—personal credit fluctuations, vehicle residual value declines, and other factors could turn into bad debt risks, testing automaker resilience.

If traditional “price wars” are retail battles where automakers temporarily cut prices and consumers benefit briefly, then the long-term low-interest loans reflect a shift in competitive mindset. Automakers no longer aim solely to “sell cars,” but to “retain users.” Over these 7 years, users may engage in insurance, maintenance, trade-in, and other activities, creating ongoing value for the brand. For automakers, low-interest loans are just the entry point; true financial strength is demonstrated through user engagement after the sale. For example, automakers can extend user value through software subscriptions, supercharging services, and other offerings.

Some industry insiders believe that low-interest loans are merely promotional tools that may boost short-term sales but have uncertain long-term effects on the overall auto market. However, for some brands, low-interest financing can lower purchase barriers but cannot mask product shortcomings. Only brands with strong technology and high residual values will have consumers willing to pay monthly installments over the 7-year cycle.

“Automakers should establish comprehensive systems for residual value assessment, dynamic credit monitoring, and overdue risk warning. Otherwise, a wave of bad debts after 7 years could wipe out today’s sales gains,” Wu Kun warned. In this high-stakes gamble of “borrowing volume over time,” those who can manage risks, maintain technological innovation, and extend service value will stand a better chance of winning in this “financial war.”