Automotive Finance Market Size

Automotive Finance Market Overview

Automotive Finance Market Size was valued at USD 251.9 Billion in 2022. The Automotive Finance market industry is projected to grow from USD 271.5 Billion in 2023 to USD 495.2 Billion by 2032, exhibiting a compound annual growth rate (CAGR) of 7.80% during the forecast period (2023 - 2032). Increasing vehicle prices, low-interest rates, growing demand for vehicles, longer loan terms, easy access to financing, lease options, shift towards electric vehicles (EVs) are the key market drivers enhancing the market growth.

Source: Secondary Research, Primary Research, MRFR Database and Analyst Review

Automotive Finance Market Trends

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  Increasing Vehicle Prices is driving the market growth

  
  

The expansion of the automobile loan market has been significantly influenced by rising car prices. As vehicles get more technologically sophisticated, with more amenities, safety features, and higher performance, their price tags rise. This rising trend in vehicle prices has had a variety of effects on the auto finance industry, including modifications to customer behavior, market dynamics, and business strategies of financial institutions. Given that the average cost of new cars is at an all-time high, many customers find it challenging to purchase cars outright with cash. People therefore employ auto loans and leasing agreements to lower the price of their preferred autos. With the help of auto financing, purchasers can spread out the expense of the vehicle over a longer period of time, reducing the initial financial strain and making automobile ownership more accessible to a larger variety of people.

Financial institutions that have benefited from the opportunity presented by rising car prices include banks, credit unions, and auto loan providers. They have developed specialized financing options to accommodate consumers' wide range of needs and credit profiles. Flexible loan terms, aggressive interest rates, and unique financing deals are just a few of the strategies lenders employ to entice customers and speed up the purchase of vehicles. The trend of growing vehicle prices has resulted in a change in consumer preferences. Many potential buyers today choose for more expensive vehicles with cutting-edge amenities and technology that may previously have been out of their budget range. This change in consumer behavior has raised demand for automobile loans as consumers hunt for alternate sources of funding to purchase their chosen autos.

As the automotive loan sector grows in response to increased vehicle prices, lenders and financial institutions have access to new revenue streams. The money from auto loans and leasing agreements' interest payments has a significant impact on their overall profitability. Several financial institutions also offer add-on services like auto insurance, extended warranties, and maintenance plans in order to boost their income and profitability.

Another noticeable impact of rising car prices on the auto financing industry is the growth of leasing as an increasingly popular alternative to traditional auto buying. Leasing allows consumers to experience the benefits of driving a new vehicle with lower monthly payments as compared to financing a purchase. As vehicle costs grow, the cost difference between buying and leasing a car is less, making leasing an attractive option for purchasers on a tighter budget who want to replace their cars more frequently. Thus, driving the Automotive Finance market revenue.

Automotive Finance Market Segment Insights

Automotive Finance Provider Type Insights

The Automotive Finance Market segmentation, based on provider type, includes banks, OEMS and other financial institutions. The banks segment dominated the market in 2022. The fast processing requirements with minimal documentation requirements, together with the high dependability requirements, are factors that contribute to the banking segment growth. Previously, banks would only finance between 70 and 80 percent of the total cost of the automobile.

Automotive Finance Finance type Insights

The Automotive Finance Market segmentation, based on finance type, includes direct and indirect. The direct category generated the most income in 2022. Consumers are concentrating on identifying the funding source that most closely matches their needs. Customers apply directly for auto loans from banks, credit unions, and other lending institutions. Furthermore, because no outside salesman or dealer is involved in the lending process, customers have total control over it.

Automotive Finance Purpose Type Insights

The Automotive Finance Market segmentation, based on purpose type, includes loan, leasing and others. The loan segment dominated the market in 2022. Most of the world's population uses loans as a common method of buying a car. Leasing and finance companies have additional capital sources to make available to customers as the credit landscape improved. Additionally, low-interest loans are a target market for banks and credit unions.

Automotive Finance Vehicle Type Insights

The Automotive Finance Market segmentation, based on vehicle type, includes commercial vehicles and passenger vehicles. The passenger vehicles segment dominated the market in 2022. The segment's expansion can be linked to the rising need for mobility brought on by longer commutes to work, family, school, leisure, and retail destinations. Due to the ongoing alteration in consumer needs, the automobile sector is expanding. Innovations in telematics, driverless vehicles, advanced driver assistance systems, entertainment systems, safety systems, and in-dash controls are all becoming more and more necessary, especially in passenger cars.

Figure 1: Automotive Finance Market, by Vehicle Type, 2024 & 2032 (USD Billion)

Source: Secondary Research, Primary Research, MRFR Database and Analyst Review

Automotive Finance Regional Insights

By region, the study provides the market insights into North America, Europe, Asia-Pacific and Rest of the World. Europe Automotive Finance market dominated this market in 2022 (45.80%). Incentives and subsidies are provided by a number of European governments to encourage the use of electric vehicles and other environmentally friendly vehicles. The demand for automobile financing in the electric vehicle category is driven by these incentives. Further, the German Automotive Finance market held the largest market share, and the UK Automotive Finance market was the fastest growing market in the European region.

Further, the major countries studied in the market report are The U.S., Canada, German, France, the UK, Italy, Spain, China, Japan, India, Australia, South Korea, and Brazil.

Figure 2: Automotive Finance Market Share By Region 2024 (Usd Billion)

Source: Secondary Research, Primary Research, MRFR Database and Analyst Review

The North America Automotive Finance Market accounts for the second-largest market share. North America has a strong credit culture thanks to a long history of consumer borrowing for numerous products, including automobiles. The availability of credit and consumers' familiarity with financing options are driving the growth of the region's automobile finance market. Further, the U.S. Automotive Finance market held the largest market share, and the Canada Automotive Finance market was the fastest growing market in the North America region.

The Asia-Pacific Automotive Finance Market is expected to grow at the fastest CAGR from 2023 to 2032. The middle-class population has significantly increased in the Asia Pacific region, which has increased disposable income and increased demand for automobiles. The burgeoning car finance sector is being driven by this expanding middle class. Moreover, China’s Automotive Finance market held the largest market share, and the Indian Automotive Finance market was the fastest growing market in the Asia-Pacific region.

Automotive Finance Key Market Players & Competitive Insights

Leading market players are investing heavily in research and development in order to expand their product lines, which will help the Automotive Finance market, grow even more. Market participants are also undertaking a variety of strategic activities to expand their global footprint, with important market developments including new product launches, contractual agreements, mergers and acquisitions, higher investments, and collaboration with other organizations. To expand and survive in a more competitive and rising market climate, Automotive Finance industry must offer cost-effective items.

Manufacturing locally to minimize operational costs is one of the key business tactics used by manufacturers in the global Automotive Finance industry to benefit clients and increase the market sector. In recent years, the Automotive Finance industry has offered some of the most significant advantages to medicine. Major players in the Automotive Finance market, including Ally Financial, Bank of America, Capital One, Chase Auto Finance, Daimler Financial Services, Ford Motor Credit Company, GM Financial Inc., Hitachi Capital, Toyota Financial Services, Volkswagen Financial Services and others, are attempting to increase market demand by investing in research and development operations.

BoA is a bank and financial holding company that offers a range of banking products, wealth management Platform, and other related financial solutions through its subsidiaries. Its offering of services includes loans, credit and debit cards, certificates of deposit, and investment opportunities. The company offers a variety of services, including working capital management, investment banking, wealth management, treasury, market-making, financing, securities clearing, settlement, and custody. Private individuals, small and medium-sized businesses, institutional investors, large corporations, and governments all profit from it. The company has operational presence throughout the Americas, Asia-Pacific, Europe, the Middle East, and Africa. BoA's corporate headquarters are in Charlotte, North Carolina, in the US.

Vehicle manufacturer General Motors Co. (GM) is a company. It designs, manufactures, and markets cars, trucks, SUVs, and auto parts. GM additionally offers auto financing services through its subsidiary General Motors Financial Company. The company provides cars and trucks to business fleet customers, leasing companies, daily rental car companies, and governments directly or through a dealer network. Chevrolet, Cadillac, Buick, GMC, ACDelco, on, periscope, Ultium, Baojun, and Wuling are a few of its best-known brands. It operates in North America, Asia Pacific, the Middle East, Africa, and South America. GM's headquarters are in Detroit, Michigan, which is located in the US.

Key Companies in the Automotive Finance market include

• Ally Financial


• Bank of America


• Capital One


• Chase Auto Finance


• Daimler Financial Services


• Ford Motor Credit Company


• GM Financial Inc.


• Hitachi Capital


• Toyota Financial Services


• Volkswagen Financial Services

Automotive Finance Industry Developments

March 2022: A digital car-buying solution was created for the previous business in collaboration with AutoFi Inc. by Santander Consumer USA Inc., a division of Santander Holdings USA Inc. This solution will comprise mobile, desktop, and in-dealership technologies that will make it easier for consumers to identify cars that fit within their budgets, streamline the financing process, and enable them to buy the vehicles they need.

January 2021: Volkswagen Finance Pvt. Ltd (VWFPL) India increased its stake in Chennai-based KUWY Technology Service Pvt Ltd (KWY) in order to offer value-added services to its clients via digital platforms. This acquisition's main objective is to expedite loan processing, which will be advantageous to both customers and dealers.

Automotive Finance Market Segmentation

Automotive Finance Provider Type Outlook

• Banks


• OEMs


• Other Financial Institutions

Automotive Finance Finance Type Outlook

• Direct


• Indirect

Automotive Finance Purpose Type Outlook

• Loan


• Leasing


• Others

Automotive Finance Vehicle Type Outlook

• Commercial Vehicles


• Passenger Vehicles

Automotive Finance Regional Outlook

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  Middle East
  
  


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  Africa
  
  


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  Latin America