Automotive & Transportation

Automotive Finance Market Analysis by Finance (Direct, and Indirect); by Provider {Original Equipment Manufacturers (OEMs), Banks, and Financial Institutions}; by Purpose (Loan, and Lease), and by Vehicle Type (Passenger Vehicles, and Commercial Vehicles) – Global Supply & Demand Analysis & Opportunity Outlook 2023-2033

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Report ID: 4653 | Published On: Jan 30, 2023

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Inflation and Looming Recession to Haunt Businesses:

In 2022 & 2023, market players expected to sail in rough waters; might incur losses due to huge gap in currency translation followed by contracting revenues, shrinking profit margins & cost pressure on logistics and supply chain. Further, U.S. economy is expected to grow merely by 3% in 2022. Purchasing power in the country is expected to fell nearly by 2.5%.
On the other hand, European countries to see the worst coming in the form of energy crisis especially in upcoming winters!! Right after COVID-19, inflation has started gripping the economies across the globe. Higher than anticipated inflation, especially in western world had raised concerns for national banks and financial institutions to control the economic loss and safeguard the interest of the businesses. Increased interest rates, strong USD inflated oil prices, looming prices for gas and energy resources due to Ukraine-Russia conflict, China economic slowdown (~4% in 2022) disrupting the production and global supply chain and other factors would impact each industry negatively.


In The News

  • Axis Auto Finance Inc.’s wholly owned subsidiary, Pivotal Capital Corp., secured an additional funding facility with Mitsubishi HC Capital Canada, Inc.

  • Bank of America Corporation announced that Lucid Group, Inc., in partnership with Bank of America, has launched Lucid Financial Services, an all-new digital platform that will provide Lucid Air consumers with an adaptable, quick, and convenient financing process, along with loan and lease purchase options.


Global Automotive Finance Market Definition

Automotive finance, also known as car finance, car financing, or auto finance, allows individuals to obtain the required financing and borrow money to purchase a vehicle. It is a collection of numerous financial products such as car loans or leases that is helpful for individuals who don’t have the capacity for the full-cash single lump payment. 

While financing a vehicle, a financial institution, through a contractual agreement, gives a loan to the buyer to purchase a vehicle. However, in exchange for the loan, the buyer is entitled to pay the lender the interest amount and fees against the borrowed money over a specific number of years. Financial institutions for automotive finance include banks, credit unions, online lenders, automobile companies, car dealerships, and others. If automotive finance is done through a credit union or bank, is considered to be less expensive as their interest rates are lower than those of a loan taken from the dealership, where the interest rate increases towards the end of the payback period. In addition, there are some dealerships available where the financing is provided through their own company which is generally known as in-house financing. This type of dealership is not considered favorable as the interest rates charged by the buyers are considerably higher than those charged by other types of lenders and dealerships. Moreover, there is another type of automotive finance known as a cash sale. If a buyer opts for a cash sale for automotive financing, then they have to pay for the entire purchase in cash. The advantage of this automotive financing is that the interest rate is very minimal, thus reducing the overall cost.


Global Automotive Finance Market: Key Insights

Base Year

2022

Forecast Year

2023-2033

CAGR

~ 7%

Base Year Market Size (2022)

~ USD 265 Billion

Forecast Year Market Size (2033)

~ USD 455 Billion

Regional Scope

  • North America (U.S., and Canada)
  • Latin America (Mexico, Argentina, Rest of Latin America)
  • Asia-Pacific (Japan, China, India, Indonesia, Malaysia, Australia, Rest of Asia-Pacific)
  • Europe (U.K., Germany, France, Italy, Spain, Russia, NORDIC, Rest of Europe)
  • Middle East and Africa (Israel, GCC North Africa, South Africa, Rest of the Middle East and Africa)


Global Automotive Finance Market Size, Forecast, and Trend Highlights Over 2023 - 2033

The global automotive finance market is estimated to garner a revenue of ~USD 455 billion by the end of 2033 by growing at a CAGR of ~7% over the forecast period, i.e., 2023 – 2033. Further, the market generated a revenue of ~USD 265 billion in the year 2022. The growth of the market can primarily be attributed to the growing demand for vehicles by the burgeoning population. As automotive finance has allowed consumers to buy a car by borrowing a loan in case they don’t have the money, it is propelling the trend of adopting automotive financing worldwide to own a vehicle for convenience. For instance, as per statistics, more than 80% of new vehicles added to the road in the United States were financed with a lease or a loan in 2019.

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Automotive finance has now become fast, convenient, flexible, and transparent. The process for obtaining a loan is simple, digital, and involves minimal documentation. Most of the giant automotive manufacturers have marked their presence in the loan market with the rising demand for vehicles. They provide loans to customers for in-house car models facilitating the buyers to purchase the vehicles at affordable costs. With the rising number of vehicles being financed as well as the average amount borrowed, the demand for automotive finance is on the rise amongst the auto finance service providers, which in turn, is expected to create massive revenue generation opportunities for the key players operating in the global automotive finance market during the forecast period. According to a 2019 report, the average amount borrowed to buy a new vehicle was over USD 32,000, and that for the used-vehicle loan was ~USD 20,000.


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Global Automotive Finance Market: Growth Drivers and Challenges

Growth Drivers

  • Growing Demand for Automotive Loans – With the rising population, the demand for vehicles has also been increasing every year. As a result, more and more people are now opting for car loans to buy a new vehicle. Owing to the ease of opting for automotive finance with easy EMI options and digital approvals, the automotive finance market is expected to escalate in the forecasted period. For instance, it was found that in the United States, auto loans reached around USD 1 trillion in 2019, an increase of 6.5% over 2018.

  • Increasing Global Sales of Automobiles – International Organization of Motor Vehicle Manufacturers (OICA), released global sales of vehicle statistics which revealed that it rose to 56 million in 2021 from 53 million in 2020. Whereas, the global production of vehicles was calculated to be 57 million in 2021.

  • Rising Share of Financial Services – Latest statistics reveal that with global GDP touching ~ USD 96 trillion in 2021, financial services were found to comprise almost 24% of the world's economy 2021.

  • Upsurge in the Financing of Used Cars – A recent report stated that in the United States, nearly 55% of used cars on the country roads in 2019 were financed with a lease or a loan.

  • Increasing Number of Vehicles Being Financed – In the United Kingdom, the number of cars bought on finance in 2018 exceeded 2.2 million, a rise of about 2% from 2017.

Challenges

  • Fluctuating Interest Rates – The inflation trend across the world has propelled financial institutions to charge a higher interest cost. In addition, some of the financial products of automotive financing are subject to fluctuation in interest rates. As a result, the adoption rate of automotive finance is expected to be low in underdeveloped countries and among the population with middle income. This trend is thus anticipated to hamper the market growth in the forecast period.
  • High Cost of Operations
  • Lack of Faith & Transparency


Market Segmentation

The global automotive finance market is segmented and analyzed for demand and supply by vehicle type segment into passenger vehicles and commercial vehicles. Amongst these segments, the passenger vehicles segment is anticipated to garner the largest revenue by the end of 2033, backed by the growing demand for passenger vehicles along with the surge in the sale of passenger cars worldwide. For instance, it was found that the global sales of passenger cars reached approximately 63 million cars in 2020. The lucrative financing solutions offered by various financial institutions are expected to attract individuals for buying/lease a vehicle for themselves very conveniently. Hence, even customers with limited sources of income are showing interest in buying a passenger car for their daily commute. All these factors add up to bring profitable opportunities for market growth.

On the other hand, the commercial vehicle segment is also attributed to garner a significant share by the end of the forecast period. As the costs of commercial vehicles are higher as compared to passenger cars, people use automotive finance to buy these vehicles for commercial use. Also, the advantage of vehicle changes or vehicle upgradation in the leasing of a commercial vehicle through automotive financing is expected to fuel the segment growth.

The global automotive finance market is also segmented and analyzed for demand and supply by the provider into original equipment manufacturers (OEMs), banks, and financial institutions. Out of these three segments, the banks’ segment is expected to hold the largest share in the upcoming years. The major factors that are attributed to the segment growth are the hassle-free documentation process along with the high-reliability features. In addition, the rising adoption of digital automotive finance methods in the banking sector has eased the process and elevated the adoption rate. Additionally, the lower interest rate compared to other providers is also forecasted to create a positive outlook in the future.

Our in-depth analysis of the global automotive finance market includes the following segments:

     By Finance

  • Direct
  • Indirect

     By Provider

  • Original Equipment Manufacturers (OEMs)
  • Banks
  • Financial Institutions

     By Purpose

  • Loan
  • Lease

     By Vehicle Type

  • Passenger Vehicles
  • Commercial Vehicles


Global Automotive Finance Market Regional Synopsis

The North America automotive finance market, amongst the market in all the other regions, is projected to hold the largest market share by the end of 2033. The presence of major automotive finance providers along with the increased production of vehicles in the region is the major factor that is projected to fuel the market growth. As per the statistics released by the International Organization of Motor Vehicles (OICA), vehicle production in the American region rose from around 15 million vehicles in 2020 to 16 million vehicles in 2021. At the same time, the increasing population in the region, in addition to the rapid introduction of advanced technologies and increased demand for electric vehicles, connected cars, and autonomous cars, is anticipated to foster the demand for automotive finance to purchase a vehicle in the upcoming years.

The market in Asia Pacific is also expected to grow with a significant CAGR over the next few years, owing to the rapid expansion of the automotive industry in the region. Also, the other factors contributing to market growth are the favorable government policies for purchasing a car in economies such as India, Japan, and China, increasing disposable income leading to higher spending capacity, and rising Gross Domestic Product (GDP).

Automotive-Finance-Market-share

Automotive-Finance-Market-share
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Top Featured Companies Dominating the Global Automotive Finance Market

    • Axis Auto Finance Inc.

      • Company Overview
      • Business Strategy
      • Key Product Offerings
      • Financial Performance
      • Key Performance Indicators
      • Risk Analysis
      • Recent Development
      • Regional Presence
      • SWOT Analysis
    • Bank of America Corporation
    • KPMG International Limited
    • Genpact
    • Ally Financial Inc.
    • Mercedes-Benz Group AG
    • Ford Motor Company
    • General Motors LLC
    • Mitsubishi HC Capital UK PLC
    • PricewaterhouseCoopers LLP 

Key Questions Answered in the Report

1) What are the major factors driving the growth of the finance market?

Ans: Increasing sales of vehicles as well as a rising amount of automotive loans along with more and more vehicles being financed with a lease or a loan are some of the major factors anticipated to drive the growth of the market.

2) What would be the CAGR of finance market over the forecast period?

Ans: The market is anticipated to attain a CAGR of ~7% over the forecast period, i.e., 2023 – 2033.

3) What are the challenges affecting the finance market growth?

Ans: High cost of operations, as well as fluctuating rate of interest, are some of the factors estimated to hamper the market growth.

4) Which region will provide more business opportunities for growth of finance market in future?

Ans: The market in Europe is projected to hold the largest market share by the end of 2033 and provide more business opportunities in the future.

5) Who are the major players dominating the finance market?

Ans: The major players in the market are Axis Auto Finance Inc., Bank of America Corporation, Genpact, General Motors LLC, PricewaterhouseCoopers LLP, Ally Financial Inc., Mitsubishi HC Capital UK PLC, and others.

6) How are the company profiles selected?

Ans: The company profiles are selected based on the revenues generated from the product segment, geographical presence of the company which determine the revenue generating capacity as well as the new products being launched into the market by the company.

7) What are the segments in the automotive finance market?

Ans: The market is segmented by finance, provider, purpose, vehicle type, and by region.

8) Which segment captures the largest market size in vehicle type segment in the automotive finance market?

Ans: The passenger vehicles segment is anticipated to garner the largest market size by the end of 2033 and display significant growth opportunities.

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