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

More and more automakers are launching long-term, low-interest car purchase plans. Photo by Mei Shuang/Shutterstock

Reporter Mei Shuang

“Monthly payments are only 1,918 yuan, and you can drive a new car with just the cost of a daily coffee.” In the fierce promotional battles among car companies, the once-popular cash discount posters are quietly being replaced by these precisely calculated daily installment financial plans.

From new car manufacturers to joint ventures, an increasing number of automakers are breaking the traditional 1- to 5-year car loan cycle, launching intensive long-term, 7- or even 8-year low-interest purchase plans. Behind the allure of “low monthly payments,” there is a complex financial picture— for automakers, it’s a clever strategy to maintain pricing structures 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 store advertisements. Industry insiders told the reporter that low-interest auto loans are a trend that benefits both sides by tapping into more consumer demand. Consumers should pay attention to the specific models of low-interest loans and hidden costs involved in purchasing.

Low-interest loans become the mainstream solution

By 2026, the main battleground for new energy vehicle brands will shift 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 war,” extending car loan periods to 7 or even 8 years, with annual interest rates generally between 2.5% and 5%. During visits to new energy vehicle stores, the reporter observed that “interest-free, low-interest, zero-down-payment loans” have replaced price reductions as key promotional phrases on store posters. Some brands also offer different financial plans for various 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 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 without reducing prices, it 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 loan plans creates multiple benefits. For consumers, ultra-long-term low-interest installment plans mean lower purchase thresholds and repayment pressures, making them especially 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 a direct confrontation—using profit margins to boost sales, which can harm brands and loyal customers; financial wars are more like a gentle cut—lowering entry barriers with low-interest, long-term loans, locking in customers before prices are cut,” said a representative 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 a 50% reduction, and automakers are also seeking 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” or “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 monthly payments of about 4,000 yuan. But choosing a 7-year ultra-low-interest plan reduces the monthly payment to less than 3,000 yuan, which fits his budget.

However, behind these seemingly attractive “low monthly payments” lies a hidden “total cost” that is often overlooked. “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 may only see the ‘0 interest’ slogan on the poster but forget the small print at the bottom—‘Sample only, subject to change, final terms depend on actual approval and contract.’”

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

Bank direct loan mode 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 initially belonging to the consumer but mortgaged to the bank. This mode has clear legal relationships and strong consumer rights protection.

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

Most current ultra-low-interest, long-term plans, however, are based on leasing financing. In this mode, a leasing company affiliated with the automaker provides the loan. Before full repayment, the vehicle ownership remains with the leasing company, and consumers only have usage rights. Only after all payments are made can ownership be transferred. “This mode can extend the loan period, but during repayment, consumers are only lessees and may face vehicle ownership issues,” warned the insider.

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

Changing competitive strategies among automakers

The “financial war” since the beginning of the year appears to be a contest not just of interest rates but also 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 from a joint venture automaker. The 7-year ultra-long-term loans also bring greater uncertainty—personal credit fluctuations, vehicle residual value declines, and other factors could turn into bad debt risks, testing automakers’ abilities.

If traditional “price wars” are retail battles where automakers temporarily cut prices to benefit consumers, 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, such as software subscriptions and supercharging services.

Some industry experts believe that low-interest loans are merely promotional tools that may temporarily boost sales but their long-term impact on the overall auto market remains to be seen. However, for some brands, low-interest loans lower purchase barriers but cannot hide product shortcomings. Only brands with strong technology and high residual values will make consumers willing to pay monthly installments over the long term.

“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.”