Exposing the Hidden Tactics of Car-Collateralized Loans: Precision Traps Behind "No Vehicle Possession"

“No collateral, same-day funds” “Own a car, get a loan; no collateral, more flexible”—similar slogans are common in the car mortgage market, emphasizing convenience and efficiency. However, behind this seemingly flexible loan model, there are many industry tricks that are not easily noticed.

China Securities Journal investigation found that what is called “convenient” often comes at a high cost. In car mortgage loans, besides the nominal interest, there are additional fees such as GPS installation fees, service fees, management fees, and other charges. These layered fees often lead to a reduction in the principal amount after signing the contract, and sometimes the vehicle ownership is transferred without the borrower realizing it.

Various fees appear during processing

Car mortgage lenders typically target individuals with poor credit or urgent funding needs. Phrases like “high limit, quick approval” and “blacklisted credit also approved” hide contracts filled with multiple fee charges.

A consumer from Guizhou shared their experience with a reporter. In 2022, she took out a car mortgage loan for 124,000 yuan, but shortly after the funds were received, about 20,000 yuan was deducted by the intermediary as a service fee. “Less than 100,000 yuan received, to be repaid over 3 years, totaling 137,800 yuan.”

What frustrated her more was that when she wanted to make early repayment and settle the loan, she found many restrictions. “You must repay for more than a year before you can repay early.” In June 2025, after paying off the loan and removing the mortgage, she was charged an additional fee. When she returned to the intermediary, she found the owner had already fled. Business registration info showed that the owner had opened another similar intermediary in a neighboring city.

A search on the Black Cat Complaint platform using “car mortgage” found nearly 3,000 complaints about illegal charges, hidden fees, and high interest rates. A netizen from Jiangsu said on social media: “Someone in my WeChat circle took out a car mortgage loan. They said there were no fees during consultation, but once they proceeded, all kinds of fees appeared, like GPS installation, documentation fees, parking fees…”

In early 2023, Guangdong Geometry Law Firm published an article stating that some institutions deliberately hide the true nature of “sale and leaseback,” which involves selling the vehicle to the institution and then leasing it back for use, without mentioning the transfer of ownership. They falsely claim “it’s just a mortgage, the car is still yours,” while avoiding discussion of hidden fees and default risks.

As soon as customers are anxious, the tricks begin

The reporter inquired with multiple loan intermediaries under the identity of “full payment car purchase for two years with overdue credit card payments.” A loan intermediary in Hunan said: “If credit is poor, only blacklisted car mortgages are possible, requiring GPS installation, with the collateral but not the vehicle. Our consultation fee is 3% to 5%, charged after the funds are received.”

A Tianjin intermediary said: “If the credit is good, we go through bank channels, no GPS needed, no other fees. If credit is poor, you must use our product, with GPS installation costing 2,500 or 3,000 yuan. We don’t charge clients directly; partner institutions give us rebates.”

However, oral promises from intermediaries often differ from actual experiences. An industry insider with years of experience in car mortgages revealed: “Every day, we deal with clients in urgent need of money. As soon as they are in a hurry, the tricks start. Many people don’t know the actual costs.” First, various miscellaneous fees like GPS installation, service fees, appraisal fees… Many institutions deduct these directly from the principal before disbursing funds. For example, if a client applies for 100,000 yuan, after deducting 10,000 yuan in miscellaneous fees, they only receive 90,000 yuan, but the total repayment is calculated based on 100,000 yuan plus interest.

Regulatory tightening prompts industry reshuffle

In October 2025, new regulations on loan assistance took effect, prompting many loan agencies to shift toward car mortgage business. The current market’s main participants include fund providers, traffic platforms, and service providers. For example, Alipay’s “Star Select Car Loan” is operated by Ant Group’s wholly owned subsidiary Ant Galaxy, serving as an information intermediary providing loan application access, while actual loan services are provided by licensed financial institutions like Ping An Bank.

However, hidden fees and other issues still persist in the car mortgage market. Zeng Gang, deputy director of the National Financial and Development Laboratory, said that the root cause is the contradiction between thin compliance profits and capital-driven greed. Legitimate car mortgages are strictly limited by interest rate caps. To pursue higher returns, some institutions use low-threshold, lightly regulated leasing companies to lend under the guise of “sale and leaseback”—a model that allows arbitrary addition of charges.

A bigger challenge is the lack of transparency. Zeng Gang believes that the legal classification of “nominal lease, actual loan” is difficult, and comprehensive fee information is opaque. Legally, leasing transfers vehicle ownership, while car mortgages only establish a lien. Institutions exploit this ambiguity by splitting and hiding fees like GPS installation and appraisal costs within contracts.

Yao Xiaoming, senior investment advisor at Jufeng Investment Consulting, said that to fundamentally regulate the market, it is crucial to unify licensed operations, enforce mandatory full-disclosure of annualized comprehensive interest rates, strictly punish violations, and penetrate the entire chain of fund providers, loan assistance agencies, and intermediaries to greatly increase the cost of violations.

Recently, the State Administration of Financial Regulation and the People’s Bank of China jointly issued the “Regulations on Clear Disclosure of Personal Loan Business Total Financing Costs,” effective from August 1, 2026. The regulations specify the scope, procedures, and steps for disclosing interest and fee information in personal loans, requiring lenders to present borrowers with a clear comprehensive financing cost statement.

Guangdong Geometry Law Firm reminds consumers to “ask about the nature, ask about costs, ask about the contract” before signing, request stamped fee lists detailing all costs besides monthly payments, and calculate the annualized interest rate including all fees. During the process, regularly check vehicle registration status and credit reports to monitor for unauthorized ownership changes or false information uploaded to credit systems.