Less than 5% of all deliveries, yet in the US it's a 46% share

Though China continues to make and sell the most cars of any country in the world, vehicle leasing remains a largely untapped sector that lags far behind mature markets, said experts and insiders.

Naeem Aftab, general manager of NetSol Technologies Inc, a company that provides asset finance and leasing software, said statistics from the China Leasing Union show leases of all kinds totaled 1.55 trillion yuan in 2012, but only a meager 25.7 billion was in the auto industry.

Wang Yong, general manager of Tonbright Finance Leasing Co, said leasing accounted for 46 percent of total new car deliveries in the US but less than 5 percent in China.

"It will be a large market," said Wang in an interview with Money Week, adding that leasing is especially attractive to small and medium-sized companies.

"Companies emphasize cash flow - and auto leasing is something they want," Wang said.

Tonbright has leased vehicles to more than 500 companies since it was established in early 2013, said Wang.

The China Association of Automobile Manufacturers estimates the market size could reach 525 billion yuan by 2015.

And new-energy vehicles will be a major driving force in the sector, according to a report from the Shanghai Leasing Services & Exchange.

"Hybrid and electric vehicles are gaining popularity as petroleum prices are soaring and there is a universal call for carbon emission reduction," it said.

In addition to finance companies, many auto manufacturers and dealerships across the country are also offering leasing.

The industry is also receiving more government support in many cities, according to the China Securities Journal. The Guangzhou government has vowed to make the city the largest auto leasing market in China, the report said.

Despite bright prospects, industry insiders said the auto leasing industry will not grow rapidly until some obstacles are removed .

The report said most auto leasing companies raise capital through bank loans or selling shares to private investors.

It said neither approach is optimal because many banks are reluctant to lend because of the complicated procedures to evaluate and register vehicles, while company bosses are not willing to sell their shares for fear of interference in company operations by other investors.

So some are exploring new ways to attract capital such as asset-backed securities, said Song Guanghui, deputy managing director of asset management at Ping'an Securities.

But Gao Chuanyi, head of the Shanghai Leasing Trade Association, noted there have been few instances of asset-backed securities meeting the capital shortfall. Still, he agreed the industry has huge potential.

Other problems include the lack of personal credit information as well as the lack of a sound and uniform appraisal system in China's second-hand auto markets, said an industry insider in an interview with China Securities Journal.

He said leasing companies cannot access the central bank's system of personal credit information and at the same time there are few reliable and authoritative third-party credit rating agencies in China, which has resulted in higher risk control costs.

Lack of a uniform appraisal system in the second-hand auto market is in turn affecting the costs of auto leases, he added.

Aftab at NetSol Technologies called for more legislation efforts to promote the industry's development.