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

An increasing number of automakers are launching long-term, low-interest car purchase plans. Photo by Mei Shuang

Securities Times Reporter Mei Shuang

“Monthly payments are only 1,918 yuan, just the cost of a daily coffee, and you can drive a new car.” The cash discount posters that were once very popular in car company promotional battles are quietly being replaced by these precise daily installment financial plans.

From new car manufacturers to joint ventures, more and more automakers are breaking the traditional 1 to 5-year car loan cycle, launching intensive long-term low-interest purchase plans of 7 or even 8 years. Behind the allure of “low monthly payments,” there is a complex bill— for automakers, it is 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” appears in many car brand store advertisements. Industry insiders interviewed by the reporter said that low-interest auto loans are a trend, beneficial for tapping into more consumer demand, but consumers should pay attention to the mode of implementation and hidden costs of these low-interest loans.

Low-interest loans becoming mainstream

By 2026, the main battleground for new energy vehicle brand competition 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 car companies 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 key words 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 Tesla’s Pudong store in Shanghai told the reporter. Recently, transaction volumes in the store have been noticeably higher than during the Spring Festival period, with more consumers choosing the 5-year zero-interest plan 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 of “7-year ultra-low interest, with a down payment starting at 38,000 yuan.” The store’s sales staff openly stated that if other brands lower the purchase threshold, not doing so would be equivalent to letting potential customers flow to competitors.

According to Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, many automakers have seized the opportunity to introduce long-term low-interest car purchase plans, creating multiple benefits. For consumers, ultra-long-term low-interest installment plans mean lower purchase thresholds and repayment pressures, making them more suitable for young buyers with limited budgets. For automakers, this promotional method can help increase sales, clear inventory, boost revenue, and use the obtained liquidity for operations.

“‘Price wars’ are a direct confrontation, trading profit for sales, which can also harm the brand and loyal customers; ‘financial wars’ are more like a soft knife—by lowering thresholds with low-interest long-term loans, automakers can lock in customers early without directly lowering prices,” said a person from a new energy vehicle brand. Since the beginning of this year, the vehicle purchase tax for new energy vehicles has shifted from “full exemption” to “half exemption,” 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” bill

Under the aggressive marketing campaigns by automakers, 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 price is around 250,000 yuan, using a traditional bank 5-year loan, the down payment would be over 50,000 yuan, with monthly payments around 4,000 yuan; but choosing the 7-year ultra-low interest plan reduces the monthly payment to less than 3,000 yuan, just within his psychological affordability.

However, behind these seemingly attractive “low monthly payments” lies a hidden “total bill” that is often overlooked. “Consumers are often attracted by the appearance of low monthly payments and rarely calculate the total interest paid when the loan period is extended,” said Wu Kun, an automotive industry analyst. “They may only see the ‘0 interest’ on the promotional posters but forget the small print at the bottom that says ‘Sample only for reference, down payment and monthly payments may vary, final terms depend on actual approval and contract.’”

An industry insider explained to the reporter that although the low-interest loan policies of automakers appear similar on the surface, their funding channels and ownership structures are quite different, mainly divided into three modes: bank direct lending, auto finance company mode, and leasing mode.

The bank direct lending model involves cooperation between automakers and banks, with banks providing funds and automakers offering interest subsidies to lower rates. Consumers sign an “auto mortgage loan contract,” with vehicle ownership from the start belonging to the consumer, only mortgaged to the bank. This model has clear legal relationships and stronger protection of consumer rights.

The auto finance company mode involves a finance company under the automaker, usually closely tied to the brand’s sales, with more flexible approval processes and relatively shorter loan periods.

However, most of the current ultra-low interest long-term plans on the market are based on leasing models. In this mode, a leasing company under the automaker provides the loan. Before the loan is repaid, the vehicle ownership belongs to the leasing company; consumers only have usage rights, and full ownership can only be transferred 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.

“Consumers should carefully check whether it is a loan or lease when signing contracts, and request a comprehensive cost breakdown including interest, insurance, and fees to understand the final costs,” Wu Kun advised. “Before placing an order, consumers should clarify whether there are bundled financial services and understand rules for early repayment.”

Changing competitive mindset among automakers

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

If traditional “price wars” are retail battles where automakers temporarily offer discounts and consumers benefit temporarily, and the transaction ends once completed, long-term low-interest loans reflect a shift in competitive thinking. Automakers no longer aim merely to “sell cars,” but to “retain users.” Over these 7 years, users may generate ongoing value through insurance, maintenance, trade-ins, and other services. For automakers, low-interest loans are just the entry point; true financial strength is demonstrated after user binding. For example, automakers can extend user value chains through software subscriptions, supercharging services, and more.

Some industry insiders believe that low-interest loans are just promotional tools that may boost sales in the short term, but their long-term impact on the overall auto market remains to be seen. However, for some automakers, low-interest loans can lower purchase barriers but cannot hide product shortcomings. Only brands with strong technology and high residual values can make users willing to pay monthly installments over the 7-year cycle.

“Automakers should establish a comprehensive system covering residual value assessment, user credit monitoring, and overdue risk warning. Otherwise, a bad debt wave after 7 years could swallow today’s sales dividends,” Wu Kun warned. In this 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.”