Automotive Finance Market Size, Share & Industry Analysis, By Provider Type (Banks, OEMs, Others), By Purpose Type (Loan, Leasing), By Vehicle Condition (New, Used), By Vehicle Type (Passenger Cars and Commercial Vehicles), and Regional Forecast, 2024-2032

The automotive finance market size was valued at USD 277.52 billion in 2023. The market is expected to grow from USD 295.58 billion in 2024 to USD 513.19 billion by 2032, exhibiting a CAGR of 7.1% during the forecast period.

Auto finance services aim to provide funds to customers who are willing to purchase or lease a car. Global technological advancement has also created demand for the automotive financing sector significantly in the last few years. Technologies such as Block chain, digital payments systems, and online/mobile banking are the most prominent technologies used by financial institutions today to provide the best automotive financial services to their clients. The number of people willing to take these services is growing steadily since the last few years, as disposable income is rising in developing countries such as India, China, Brazil, Mexico, and Indonesia.

The old methods of the automotive financing industry were highly complicated and time-consuming for a typical customer. It used to take several days to process the application manually. However, due to digitization, now, the same process takes only a few minutes. Therefore, the customer can easily avail of quick & hassle-free transactions. The trend of car-sharing, ride-hailing, and car rental is also steadily growing post-2015 as many aggregators such as Uber entered auto financing and offered their mobile application-based platforms for easy car booking and payment.  Rental companies are emerging as prominent customers for companies around the world.

The early phase of the COVID-19 pandemic, notably in 2020 Q1, significantly impacted the automotive industry, with new vehicle demand decreasing by 3-4% and used cars by 1-2% compared to 2019, as reported by OICA. However, post-June 2020, sales rebounded as lockdown measures eased globally. Accenture noted a 3.2% increase in new loan demand in Q2 2020 compared to the same period in 2019. Pickup trucks and light commercial vehicles dominated loan applications in 2020. Automotive finance firms responded by introducing attractive repayment options to aid customers amidst the pandemic, such as Ford's 90-day payment deferment for new car loans, a strategy also adopted by Nissan and Hyundai.

Automotive Finance Market Trends

Increasing Sales of Electric Vehicles to Favor Market Growth 

The global automotive industry is witnessing a revolutionary change as the adoption of electric vehicles is growing steadily across the world. The International Energy Agency projected sales of nearly 14 million electric cars in 2023, with over 2.3 million sold in the first quarter. This marks a 35% surge in electric car sales compared to 2022 and would elevate the global electric sales share to approximately 18%, a rise from 14% in 2022. This change in market dynamics is creating significant business opportunities for the automotive finance industry. Electric vehicles are expensive commodities; thus, the majority of new car buyers opt for loan or leasing services. Additionally, as electric vehicle (EV) manufacturers continue to expand their lineup annually, consumer interest in EVs for new vehicle purchases has increased. In February 2024, Experian's State of the Automotive Finance Market Report: Q4 2023 revealed that EVs accounted for 8.6% of total new retail transactions, a rise from 7.1% in Q4 2022. Further analysis indicated that 44.8% of new EV retail transactions were financed through loans, while 30.7% were leased.

Automotive Finance Market Growth Factors

Emergence of Online Automotive Finance Applications to Propel Market Growth

Online loan services have emerged as the most disruptive technology in this industry. The mobile/web-based platforms allow easy viewing, comparison, and applying for loan services. The increasing vehicle prices are propelling the demand for automotive finance services. Although demand for automotive finance is relatively saturated in developed countries, developing countries are anticipated to emerge as the lucrative target market for financing companies. However, customers in developing countries have more faith in banks for such loans instead of financial companies. For instance, in India, the majority of the automotive loans are taken from nationalized banks and private banks, mainly due to low-interest rates & services. Therefore, the rising automotive sales will directly lead to automotive finance market growth.

Increasing Vehicle Prices to Drive Market Growth

The inflation in commodity prices globally has compelled automotive manufacturing companies to increase vehicle prices in the last few years. Moreover, the surging demand from developing nations, high government taxes, and stringent policies further boost vehicle prices. In March 2024, India's one of the leading commercial vehicle manufacturers, Tata Motors, declared a price hike of up to 2% on its commercial vehicles starting from April 1, 2024. This adjustment aims to counterbalance the enduring effects of prior input costs. The extent of the price increase fluctuates based on specific models and variants but is implemented uniformly across the complete spectrum of commercial vehicles. However, as the disposable income in these countries is also growing, customers opt for automotive loans to fulfill their financial needs for purchasing a vehicle.

RESTRAINING FACTORS

High Competition and Market Saturation to Affect Market Growth

The market is highly diversified, with many players such as banks, captives, financial institutions, and OEMs. The high competition increases the expenses on operation and marketing and makes it highly challenging for these companies to gain new customers. Lower interest rates and transparent financing processes are the key factors required to succeed in this particular market. New players in this market face major challenges as renowned brands dominate it.

Automotive Finance Market Segmentation Analysis

By Provider Type Analysis

OEM Segment to Gain Momentum during Forecast Period

Based on the provider type, the market is segmented into banks, OEMs, and others.

The bank segment dominated the global market in 2023. The growth opportunities can be attributed to the high trust among automotive buyers in developing countries on banks than other financial institutions. Most of the nationalized banks offer lower interest rates compared to their private counterparts. Therefore, the bank segment is expected to dominate the market over the next few years.

The OEMs segment is emerging as the fastest-growing segment and is anticipated to witness growth at an 8.2% CAGR between 2024 to 2032. Captive finance companies are owned by OEMs and run as separate subsidiaries to provide loans and lease funds to buyers. OEMs provide lucrative offers, including extended service periods, low-interest rates, and buy-back offers to gain more outstanding customer shares.

By Purpose Type Analysis

Loan Segment to Hold Largest Market Share

Based on the purpose, the market is segmented into loans and leasing.

The loan segment dominated the market with a greater than 85.7% market share. Loan offers customers credit service to buy their desired vehicle by paying a little extra interest. However, compared to leasing, this method makes the customer a legal buyer of the vehicle, and they may resale the vehicle in the future.

Car leasing is a convenient method to own a vehicle without having much financial impact on your budget. Leasing allows customers to get a vehicle at a monthly recurring payment for a limited period of time. The lender handles charges of vehicle maintenance as well as insurance. Therefore, it helps to reduce the post-purchase expenses considerably. Leasing also allows customers to get a better vehicle at a lower cost and enables changing/upgrading cars in a hassle-free process. Therefore, the leasing segment is anticipated to emerge as the fastest-growing segment over the forecast period.

By Vehicle Condition Analysis

Growing Demand for Resale Vehicle is Growing Used Vehicle Condition Segment

Based on the vehicle condition, the market is segmented into new and used.

The new vehicle segment dominated the market in 2023 as the sales of medium & heavy commercial vehicles increased substantially globally. Growing disposable income, standard of living in developing countries and upcoming new trend of using autonomous vehicles also will boost the sales of passenger cars, which further strengthens the demand for new vehicle financing.

The used vehicle segment is anticipated to grow at the highest CAGR over the forecast period. The growth can be attributed to increasing sales of used vehicles via online sales portals. Moreover, the OEMs also offer used vehicles through their showrooms which further boosts the demand for used vehicles financing.

By Vehicle Type Analysis

Passenger Car Segment is Currently Dominating the Market

Based on the vehicle type, the market is segmented into passenger cars and commercial vehicles.

The passenger car segment holds the largest share of the global market. The increasing demand for passenger cars in developing countries is key to this dominance due to improving disposable incomes and lifestyles. Lucrative financing solutions are attracting new customers to buy/lease vehicles conveniently. Hence, customers with limited income are also showing interest in getting a car for their daily commute. In addition, all such things are creating automotive finance jobs opportunities in the respective regions.

The commercial vehicle segment is expected to showcase significant growth in automotive finance during the forecast period. These vehicles are high-priced compared to passenger cars, and thus, Automotive Finance services play an important role in the sales of these vehicles. Leasing is one of the most convenient options for commercial vehicles as these are used rigorously and are subject to wear and tear. Customers hence may opt for vehicle change/up-gradation after a particular period.

REGIONAL INSIGHTS

Europe is the Largest Market Owing to Presence of Major OEMs

Based on the region, the market is segmented into North America, Europe, Asia Pacific, and the rest of the world.

The European automotive market is undergoing rapid changes. The introduction of advanced technologies such as electric vehicles, connected cars, and autonomous cars fosters market growth. In such a transformative phase, companies, including both captives and independents, are expected to gain momentum as the demand for such vehicles grows substantially. Germany, U.K., and France are the dominating countries in the European market. In December 2023, Toyota Motor intends to broaden its electric vehicle (EV) range in Europe, with a goal of introducing six models by the year 2026.

The Asia Pacific market is expected to grow significantly over the next few years. The increasing penetration of car rental & sharing services in the region is boosting the market growth. The Indian automotive market has a significant growth potential as the disposable income in the country is growing steadily since the last few years, owing to its dominance in the regional automotive market. The demand for electric vehicles is increasing in China and South Korea significantly. Therefore, the industry in these countries is anticipated to gain momentum in the next few years.

The North American region is witnessing slow growth in the sector, mainly due to the COVID-19 pandemic and increasing economic instability. In the Rest of the world segment, Latin America & the Middle East & Africa are expected to witness substantial growth as the demand for commercial vehicles is steadily growing in the regions.

List of Key Companies in Automotive Finance Market

Ally Financial is a Key Player in the Market Backed by Digitization of Processes

Ally Financial was leading the market in 2023. Digitization of processes, lowering interest rates, and high geographical presence are few key reasons behind the company’s success. It has a contractual relationship with the majority of the automotive companies and dealers, which would create a revenue stream for the company. Most companies adopt Subscription-based models to improve the market share. Some of the others have digitalized the processes considering the COVID-19 pandemic guidelines.

LIST OF KEY COMPANIES PROFILED:

• Ally Financial (Michigan, U.S)


• Bank of America (New York, U.S)


• Capital One (Virginia, U.S)


• Chase Auto Finance (California, U.S)


• Daimler Financial Services (Stuttgart, Germany)


• Ford Motor Credit Company (Michigan, U.S)


• GM Financial Inc. (Texas, U.S)


• Hitachi Capital (Tokyo, Japan)


• Toyota Financial Services (Aichi, Japan)


• Volkswagen Financial Services (Brunswick, Germany)

KEY INDUSTRY DEVELOPMENTS:

• February 2024 - According to a recent survey by CULA, Credit Unions (CUs) express cautious optimism regarding the 2024 auto finance market, foreseeing a reduction in extended loan terms and a decline in interest rates. Additionally, the survey indicated that the majority of CUs intend to capitalize on the advantages of their relationships with auto dealers by expanding them in 2024.


• January 2024 - AutoFi Inc., a leading provider of automotive sales and finance technology, expanded its platform to streamline showroom operations, addressing long-standing dealer challenges, such as sales desk bottlenecks and consumer distrust. Developed in collaboration with dealers, the platform integrates deal estimation, desking, lender routing, and F&I menu, bridging the gap between CRM and DMS systems. Early adopters report significant time savings, higher loan approval rates, and increased profitability, empowering dealerships to enhance processes and improve customer satisfaction.


• October 2023 - Solifi won the Digital Innovation of the Year award at the 9th Motor Finance Europe Awards in Vienna, recognizing its Open Finance Platform's advancements in automotive finance technology.


• August 2023 - Toss Bank and Kakao Pay, prominent fintech entities from South Korea, are strategically entering the lucrative automotive finance market within the country.


• June 2023 - Xiologik revealed its entry into the automotive sector by unveiling a detailed report offering insights into the automotive software domain. The company, citing significant growth in the past year, aimed to sustain this momentum. Leveraging decades of collective experience within its team, including stints at prominent entities, such as Volkswagen Financial Services, BMW Financial Services, and BNP Paribas, Xiologik is poised to make its mark in the automotive market.


• July 2021- Maruti launched its digital platform for car financing solutions to customers. Through Maruti Suzuki Smart Finance, customers can choose the right finance partner and the best-suited loan product, besides completing all the loan-related formalities and disbursal online loans.


• May 2021 – Daimler Truck Financials launched the ‘Keep The World Moving’ Finance program for its Freightliner and Western Star trucks. The program allows a delay in the first payment by up to 120 days and an allowance of up to $5,000 based on the model. The initiative is expected to improve sales that were declined due to the COVID-19 pandemic and improve the company’s market share.


• September 2021 – Mitsubishi UFJ Lease & Finance and Hitachi Capital, the leading leasing companies in Japan, announced their merger by April 2021. Hitachi Capital and Mitsubishi UFJ Lease & Finance aim to expand their operations globally to gain a more significant market share.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on crucial aspects such as leading companies, product types, and leading product applications. Besides this, it offers insights into the automotive finance market trends and highlights vital industry developments. In addition to the factors above, the report encompasses several factors that have contributed to the market's growth over recent years.

Report Scope & Segmentation