Car Manufacturers Roll Out Seven-Year Auto Loans in Waves as Banks Show Lukewarm Interest

Since the beginning of this year, automakers such as Tesla, Xiaomi Auto, and Li Auto have launched seven-year car loans, offering low interest rates and low monthly payments to lower the car purchase threshold, sparking a wave of financial promotions in the auto market. These products are divided into two categories: bank loans and financial leasing, with significant differences in ownership, risk control, and costs. During this trend, banks are cautious due to the risks of collateral depreciation and default. Experts advise consumers to carefully calculate total expenses, understand the contract nature, and be aware of risks associated with ultra-long-term loans.

Seven-Year Car Loans Follow One After Another

Li Auto sales staff stated that the company has launched a seven-year car loan service, with Yixin Group as the partner financial institution, and only equal principal and interest repayment methods are available. According to their online calculator, the annualized interest rate (simple interest) for the seven-year loan ranges from 3.22% to 4.69%, with different rates for different models.

Additionally, unlike typical credit loans, consumers are required to mortgage the vehicle registration certificate, commonly known as the green book, to Yixin Group. “This is to prevent fraud, and the green book must be returned when the loan is repaid,” said the sales staff. Li Auto’s official website shows that the six- to seven-year car loans are provided by Tianjin Hengtong Jiahé Financial Leasing Co., Ltd., a subsidiary of Yixin Group, and after the lease term, consumers obtain ownership of the vehicle as agreed.

Tesla’s seven-year car loan products are bank loans, with options through China CITIC Bank or Shanghai Pudong Development Bank, and do not require mortgaging the vehicle registration certificate. Tesla’s official website indicates that some models have a seven-year loan with an annualized interest rate as low as 0.98%.

Xiaomi Auto also offers a seven-year car loan for the YU7 series models. Depending on the down payment, the approximate annualized interest rates are 2.55% and 3.77%. Currently, Xiaomi Auto’s seven-year car loans can be processed through partner banks or leasing companies. Several consumers on social media have reported obtaining seven-year loans through banks like Ping An Bank and Shanghai Pudong Development Bank.

Zeng Gang, Deputy Director of the National Financial Development Laboratory, stated that the proliferation of seven-year car loan plans by automakers is mainly driven by three considerations: first, indirect price reductions through ultra-long, low-interest or interest-free loans effectively lower the purchase threshold and offer substantial benefits to consumers; second, targeted outreach to lower-tier markets helps ease inventory pressure, as the seven-year loans significantly reduce down payments and monthly payments, attracting young and lower-income consumers, thereby boosting sales and accelerating capital recovery; third, it hedges against policy rollbacks and market hesitation. With the current transitional period of the half-price purchase tax for new energy vehicles, some consumers remain cautious. Automakers hope to use attractive financial leverage to dispel doubts and gain a competitive edge.

Clear Differences Between the Two Product Types

“Bank car loans and financial leasing products differ mainly in legal relationships and property rights,” said Sun Bo, partner at Beijing Yingke (Xi’an) Law Firm. Bank loan schemes are governed by the Civil Code’s provisions on loan contracts and collateral rights, with strong compliance and stable funding sources. In contrast, financial leasing involves separation of ownership and usage rights; before paying off the vehicle and related fees, the vehicle remains owned by the leasing company.

Sun Bo explained that banks are regulated by laws such as the “Personal Loan Management Measures” and “Automobile Loan Management Measures,” which impose strict requirements on down payment ratios and loan terms, reflecting a conservative risk appetite. Leasing companies operate more flexibly, often lowering down payments, extending loan terms, or using “flexible residual payments” to reduce monthly payments, helping automakers clear inventory quickly. When borrowers default, banks can only exercise collateral rights through legal procedures, whereas leasing companies, as vehicle owners, face fewer obstacles in repossessing vehicles.

Lou Feipeng, researcher at China Postal Savings Bank, noted that bank car loans are collateralized loans, with consumers owning the vehicle, and approval is strict. Leasing, in essence, is “rent-to-own,” with more flexible approval processes and support for zero down payments, but at higher costs. The main differences lie in ownership, risk bearing, and business models; overdue leasing may lead to vehicle repossession, and paid rent is non-refundable.

Banks Are Cautious About Entry

Compared to three- or five-year car loans, seven-year loans are less attractive to banks. Currently, only a few automakers like Tesla, Xiaomi Auto, and NIO have established bank partnerships, while many others mainly offer leasing products.

Zeng Gang believes that the rapid technological iteration of new energy vehicles means their residual value after seven years could plummet sharply, posing a risk of collateral value falling well below the loan amount. Additionally, the longer repayment period introduces uncertainty; if borrowers experience income fluctuations or find that continuing to repay is more costly than buying a better-equipped new car, default risks increase significantly.

The “Automobile Loan Management Measures” stipulate that the loan term (including extensions) should not exceed five years. However, in March 2025, the State Financial Supervision and Administration Commission issued a notice allowing commercial banks to extend personal consumption loan terms from no more than five years to no more than seven years in stages.

Is there a compliance risk for banks participating in seven-year car loans? Sun Bo believes that auto consumer loans are a core scenario for personal consumption loans, with full policy support, and banks are qualified to offer them. However, practical operations must strictly verify that the purchase is for genuine consumption, avoiding circumventing the “Automobile Loan Management Measures.” Banks must also adhere to prudent management principles, avoiding excessive customer targeting or loosening risk controls under transitional policies.

Zeng Gang advises consumers to evaluate three key aspects when choosing a car loan: first, carefully calculate the “total cost” over the entire period, including the down payment, seven years of interest, and residual payments; second, understand the contract type to avoid ownership traps—confirm whether it’s a bank mortgage loan or a leasing contract—and assess the stability of their repayment ability and the risk of vehicle repossession; third, consider the vehicle turnover cycle and early repayment penalties. Since new energy vehicles are rapidly evolving, early sale or trade-in may require settling remaining loans or buying out the vehicle, often incurring high early repayment fees or charges—so it’s essential to review early repayment clauses carefully.