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Car financing refers to a range of financial options which empower consumers to buy a new/used car. The COVID-19 pandemic is creating new revenue streams attributed to the expansion of digital channels for B2C (Business to consumer) exchanges during the lockdown. Also, heavy investments in autonomous vehicles with the instantaneous support of banks and financing institutes are a contributing factor in the growth of the market.
However, the pandemic has also caused a slowdown in the automobile industry with a decrease in car sales and adjustment of production capacities. Also, financial uncertainty has forced consumers to delay their plan of buying new/used cars. Additionally, despite the negative effects of the pandemic, car lenders still have to digest servicing activities like extensions and refinancing. These factors may restrain the growth of the market.
Key Market Driver -
Reduction in time needed for leasing or purchasing a vehicle, increase in cab financing services, prompt and trouble free process are some of the driving factors of the market.
Key Market Restraint -
Financial disparity of the consumers is causing them to delay the purchase of cars, coronavirus pandemic and lockdowns are causing decline in the demand and financing companies are finding it hard to survive in such times. These are the key restraining factors of the market.
The car financing market is segmented by source type (OEM, Banks, financial institutions), by vehicle type (Used, New), by purpose (loan, lease), and by geography.By source type, the market is segmented into OEM, Banks, and financial institutions. Banks are anticipated to show steady growth during the forecast period. This can be attributed to the ease of loan processing and low documentation requirement.By vehicle type, the market is segmented into financing for a used car and a new car. The new car segment is anticipated to exhibit exponential growth during the forecast period, as post-COVID, the consumers who had delayed their plan of buying a new car will be eager for financial support from the major financing institutions.By purpose type, the market is segmented into financing for loans and leasing. The loan segment accounts for a larger market share than leasing. The consumers usually prefer loans as it is hassle-free and a standard process. However, the leasing market is expected to grow at a higher CAGR during the forecast period. This can be attributed to the emerging leasing players in countries such as India, Japan, and China. Increasing digitization is also a contributing factor in the growth of this segment.
Major players operating in the global car financing market are Bank of America, Ally Financial, Daimler financial services, Hitachi capital, and Ford motor credit company, among others.
Geographically, the car finance market is segmented into North America, Europe, Asia Pacific, and the rest of the world.
Asia Pacific is expected to exhibit a higher CAGR during the forecast period due to increasing favorable government initiatives to incentivize regional production and the surge in demand for SUVs in countries such as India and China.
Europe dominated the car finance market in 2020. It is anticipated to exhibit exponential growth during the forecast period as the existing players are increasingly focused on offering their services through digital and online channels, which gives them an edge over other players.
North America is also expected to show good growth in the market attributed to the greater demand for car financing services among low-income families and first-time buyers in this region.
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