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

Securities Times Reporter Mei Shuang

“Only 1,918 yuan per month, and you can buy a new car with just a daily coffee budget.” The cash discount posters once popular in car manufacturer promotions are quietly being replaced by these precisely calculated daily installment financial plans.

From new car brands to joint ventures, more and more automakers are breaking the traditional 1- to 5-year car loan norms, launching long-term 7- or even 8-year low-interest financing options. Behind the allure of “low monthly payments,” there is a complex bill— for automakers, it’s 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” plans appear on many brand store advertisements. Industry insiders told reporters that low-interest auto loans are a trend, helping to tap into more consumer demand. Consumers should pay attention to the implementation mode of these low-interest loans and the hidden costs of purchasing.

Low-interest loans becoming mainstream

By 2026, competition among new energy vehicle brands is shifting 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 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 promotional phrases. 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 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 of “7-year ultra-low-interest, with a down payment starting at 38,000 yuan.” The salesperson added that if other brands lower the purchase threshold, not doing so 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 financing schemes creates multiple benefits. For consumers, ultra-long-term low-interest installment plans mean lower purchase thresholds and repayment pressures, making them suitable for young buyers with limited budgets. For automakers, this promotional approach can boost sales, reduce inventory, increase revenue, and use the obtained liquidity for operations.

“‘Price wars’ are direct confrontations, trading profit for sales, which can harm brands and loyal customers; ‘financial wars’ are more like a gentle cut—using low-interest, long-term loans to lower entry barriers, locking in customers before prices are cut,” said a representative from a new energy vehicle brand. Since this year, the vehicle purchase tax for new energy vehicles has shifted from full exemption to a 50% reduction, 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” bills

Under the aggressive marketing campaigns of automakers, many consumers are swayed by slogans like “interest-free” and “ultra-low interest.” Mr. Wang, living 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 a monthly payment of about 4,000 yuan. But with a 7-year ultra-low-interest plan, the monthly payment drops to less than 3,000 yuan, just within his comfort zone.

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 consider the total interest paid over the extended loan period,” said Wu Kun, an automotive industry analyst. “They may only see the ‘interest-free’ slogan on the promotional poster but forget the small print at the bottom that says ‘Sample only for reference, down payment and monthly payments may vary, final terms subject to actual approval and contract.’”

An industry insider explained that although the low-interest loan policies from automakers appear similar on the surface, their funding channels and ownership structures differ significantly, mainly falling into three modes: bank direct lending, auto finance company mode, and leasing financing.

The bank direct lending model involves cooperation between automakers and banks, with banks providing the 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 consumer rights protection.

The auto finance company mode involves a subsidiary of the automaker’s finance arm, usually closely tied to sales, with more flexible approval processes and relatively shorter loan terms.

Most current ultra-low-interest long-term schemes are based on leasing financing. In this mode, a leasing company owned by the automaker provides the loan. Before the loan is repaid, the vehicle ownership belongs to the leasing company; consumers only have usage rights, and ownership transfers only after full payment. “This mode can extend the loan period, but during repayment, consumers are only lessees and may face vehicle ownership issues,” warned the insider.

“Consumers should carefully check whether it’s a loan or lease when signing, and request a comprehensive cost breakdown, including interest, insurance, and fees, to understand the total cost,” 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 reality, it’s 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 entail greater uncertainties—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 profits to gain sales, and consumers benefit temporarily, the relationship ends once the transaction is complete. Long-term low-interest loans reflect a shift in competitive thinking: automakers no longer just want to “sell cars,” but aim to “retain users.” Over these 7 years, users may engage in insurance, maintenance, trade-in, and other series of consumption, creating ongoing value for the automaker. For automakers, low-interest loans are just the entry point; true financial strength is demonstrated through user engagement after the sale, such as through software subscriptions and supercharging services.

Industry insiders also believe that low-interest loans are merely a promotional tool. While they may boost sales in the short term, their long-term impact on the overall auto market remains to be seen. However, for some automakers, low-interest loans lower the purchase barrier but cannot mask product deficiencies. Only brands with strong technology and high residual values can make consumers willing to pay monthly installments over the 7-year cycle.

“Automakers should establish a comprehensive system covering residual value assessment, dynamic credit monitoring, and overdue risk warning. Otherwise, a wave of bad debts after 7 years could swallow today’s sales gains,” 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 firmer in this “financial war.”