10 Apr 19

Lease-loan, leasing China style

The exact volumes of the Chinese leasing industry are difficult to retrieve; leasing registrations cannot be distinguished from other types of registration and leasing companies are not publishing exact annual figures.

The biggest confusion however comes from the product line; operational leasing and lease-loans are often counted together to define the size of the leasing market, creating the impression that the Chinese leasing market is – even though small in comparison with European or Japanese volumes – sizeable.

A safe estimate of the operational lease volume is around 0.1% of annual car sales, which means roughly 25,000 cars per year.

Breakdown of vehicle sourcing in China.

23.529.400 cars were sold on the Chinese market in 2018. About 60% is paid for in cash, leaving 40% to be financed; that’s a vehicle financing market of 9.412.000 units or USD 188 billion (at an average of USD 20K per car). Traditional bank loans will fund 93% or 8,7 million cars, leaving the remaining 7% up for what is generically called “Leasing”.

This part, worth 658,000 vehicles, is often used as the reference number for China’s car lease volume, but is in reality mainly lease-loan (about 630,000 units) and a minority of real operational leasing (28,000 units). The true annual value of China’s leasing market is a mere USD 900 million; for comparison, the Belgian car leasing market value exceeds EUR 3 billion per year.


Closer to the European concept of a Finance Lease, lease-loan has become popular mainly because of its low approval thresholds. As most Chinese pay their cars in cash, only cash-poor clients hit the bank. Therefore, banks tend to be careful with personal loans, especially for cars, and ask for collateral. The client becomes owner of the asset, so guarantees need to come from somewhere else…

In a lease-loan, the “leasing company” remains owner of the asset and the risk is reduced to the exposed capital minus residual value. Lower risk, therefore easier to get an approval.

Comparing operational leasing with lease-loan:


Operational Leasing


Customer base

Clients looking to change cars often,
Clients who are looking for risk-free solutions
Clients who are looking for all-in solutions

Those who don’t have access to bank loans
Those without enough cash to pay high deposits


Funding + services


Residual Value

Close to market value

10% to 20% of MSRP

End of Contract

Return the vehicle
Purchase the vehicle

Purchase the vehicle


Market horizon

The growth of the Chinese economy is, not only because of the trade war, slowing down. This reflects in car sales, as the consumer postpones bigger purchases. Under normal circumstances, this would also mean that the leasing market is shrinking.

Lately however, the Chinese client (private and professional) is becoming more risk adverse and is starting to accept paying a price for risk mitigation. Operational leasing providers should use this momentum to increase their market share; the market is ready.

Authored by: Yves Helven