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Automotive Finance Market Size, Share & COVID-19 impact Analysis, By Provider Type (Banks, OEMs, Others), By Purpose Type (Loan, Leasing), By Vehicle Condition (New, Used), By Vehicle Type (Passenger Cars and Commercial Vehicle) and Regional Forecast, 2021-2028

Region : Global | Format: PDF | Report ID: FBI100122

 

KEY MARKET INSIGHTS

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The global automotive finance Market size was USD 248.10 billion in 2020. The global impact of COVID-19 has been unprecedented and staggering, with automotive finance witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the market exhibited a huge decline of 6.45% in 2020 as compared to the average year-on-year growth during 2017-2019. It is projected to grow from USD 245.62 billion in 2021 to USD 385.42 billion in 2028 at a CAGR of 6.5% in the 2021-2028 period. The sudden rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.


Auto finance services are aimed at providing funds to customers who are willing to purchase or lease a car. Global technological advancement has also benefited the finance sector significantly in the last few years. Technologies such as blockchain, digital payments systems, and online/mobile banking are the most prominent technologies used by financial institutions today to provide the best finance services for automotives 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 automotive financing were highly complicated and time-consuming for a common customer. It used to take several days just 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 automotive finance. The trend of car-sharing, ride-hailing, and car rental is also steadily growing post-2015 as the number of aggregators such as Uber entered auto financing and offering their mobile application-based platforms for easy car booking and payment.  Rental companies are emerging as the prominent customers for this type of finance companies around the world.


COVID-19 Impact: Decline in Passenger Car Segment to Decrease the Demand for Automotive Finance in Developed Countries


The COVID-19 pandemic had a severe impact on the automotive finance industry in the initial phase i.e. in the 2020 Q1. As per OICA (Organisation Internationale des Constructeurs d'Automobiles), The demand for new vehicles dropped by 3-4% and for used cars by 1-2% compared to 2019. However, the sales of vehicles resumed post-June 2020 as the lockdown lifted in most of the countries. The demand for new loans increased by 3.2% in Q2 2020, as compared to Q2 2019, as per Accenture. Pickup trucks and light commercial vehicles were the top vehicle categories with the highest loan percentage in 2020.


In order to support customers in the hardship of the COVID-19 induced lockdown, these type of finance companies are bringing lucrative repayment schemes. For instance, Ford is offering 90 days’ delay in the first payment for new car loan buyers. Similar initiatives were practiced by Nissan and Hyundai as well.


LATEST TRENDS


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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. In 2019, Electric vehicles accounted for around 2% of the total vehicle sales, which is expected to reach 8% by 2028. This change in market dynamics is creating great business opportunities for the automotive financing industry. Electric vehicles are expensive commodities, thus the majority of the new car buyers opt for loan or leasing services.


DRIVING FACTORS


Emergence of Online Automotive Finance Applications to Propel Market Growth


Online loan services have emerged as the most disruptive technology in the auto finance 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 type of Finance services. Although demand for auto finance is fairly 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.


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 are further boosting vehicle prices. For instance, Kia Motors increased the vehicle prices by USD 400- USD 500 in the Indian market in 2020. However, as the disposable income in these countries is also growing, customers are opting 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 the presence of a large number of players such as banks, captives, financial institutions, and OEMs among others. The high competition increases the expenses on operation and marketing and also 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 it is dominated by renowned brands.


SEGMENTATION


By Provider Type Analysis


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OEM Segment is Anticipated to Gain Momentum Over the Forecast Period


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


The bank segment dominated the global market in 2020. The growth can be attributed to the high trust among automotive buyers present 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 8.9% CAGR between 2021 to 2028. Captive finance companies are owned by OEMs and are run as separate subsidiaries to focus on providing loans and leasing funds to buyers. OEMs are providing lucrative offers including extended service periods, low-interest rates, and buy-back offers to gain greater customer shares.


By Purpose Type Analysis


Loan Segment is Expected to Hold the 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 80% market share. Loan offers customers credit service so that they can 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 he/she 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. Charges of vehicle maintenance as well as insurance are handled by the lender. 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 the 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 2020 as the sales of medium & heavy commercial vehicles increased substantially globally. Growing disposable income and standard of living in developing countries is boosting the sales of passenger cars, which further boosts the demand for new vehicle financing.


The Used vehicle segment is anticipated to grow at highest CAGR over the forecast period, the growth can be attributed to increasing sales of used vehicles via online sales portals. Moreover, the OEMs are also offering 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 vehicles or cars and commercial vehicles.


The passenger car segment holds the largest share of the global market. Key automotive finance market trends behind this dominance are the increasing demand for passenger cars in developing countries owing 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 daily commute.


The commercial vehicle segment is expected to showcase significant growth in automobile finance during the forecast period. These vehicles are high-priced compared to passenger cars and thus, Automotive financing services play a significant role in 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/upgradation after a particular period.


REGIONAL INSIGHTS 


Europe Automotive Finance Market Size, 2020 (USD Billion)

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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 Europe automotive market is undergoing rapid changes. The introduction of advanced technologies such as electric vehicles, connected cars, and autonomous vehicles or cars is fostering market growth rate. In such a transformative phase, auto finance companies, including both captives and independents are expected to gain momentum as the demand for such vehicles is expected to grow substantially. Germany, U.K., and France are the dominating countries in the European market.


Asia Pacific Automotive Finance 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 growing in China and South Korea significantly. Therefore, the auto finance industry in these countries is anticipated to gain momentum in the next few years.


The North American region is witnessing slow growth in the automotive finance sector, mainly due to the COVID-19 pandemic situation 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.


KEY INDUSTRY PLAYERS


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


Ally Financial was leading the market in 2020. Digitization of processes, lowering interest rates, and high geographical presence is 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. Subscription-based models are adopted by most companies to improve the market share. Some of the others have digitalized the processes considering the COVID-19 pandemic guidelines.


LIST OF KEY COMPANIES PROFILED:



KEY INDUSTRY DEVELOPMENTS:



  • 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 also an allowance of up to $5,000 based on the model. The initiative is expected to improve sales which were declined due to the COVID-19 pandemic and would also 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, along with Mitsubishi UFJ Lease & Finance is aiming to expand its operations globally, in order to gain a greater market share.


REPORT COVERAGE


An Infographic Representation of Automotive Finance Market

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


Report Scope & Segmentation














































  ATTRIBUTE



  DETAILS



Study Period



   2017-2028



Base Year



   2020



Forecast Period



   2021-2028



Historical Period



   2017-2019



Unit



   Value (USD Billion)



Segmentation



By Provider Type



  • Bank

  • OEMs

  • Others



By Purpose Type



  • Loan

  • Lease



By Vehicle Type



  • Passenger Cars

  • Commercial Vehicles



By Vehicle Condition



  • New

  • Used



By Geography



  • North America (U.S., Canada, and Mexico)

  • Europe (U.K., Germany, France and Rest of Europe)

  • Asia-Pacific (Japan, China, India, South Korea and Rest of Asia- Pacific)

  • Rest of the World



Frequently Asked Questions

Fortune Business Insights says that the global market size was USD 248.10 billion in 2020 and is projected to reach USD 385.42 billion by 2028.

In 2020, Europe stood at USD 90.21 billion.

The market is projected to grow at a CAGR of 6.5% in the forecast period (2021-2028).

The loan segment is expected to lead this market during the forecast period.

The digitization of financial processes is driving the global market.

Ally Financial is the major player in the global market.

Europe dominated the market in terms of share in 2020.

Increasing adoption of online Auto Financing applications is expected to boost the market growth over the forecast period

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Automotive Finance Market Size, Share and Global Industry Trend Forecast till 2026
  • May, 2021
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