Automotive Financing Market By Provider Type (Banks, OEMs, and Others), Vehicle Type (Commercial, and Personal) Finance Type (Direct Loans, and Indirect Loans), and Region - Market Perspective, Market Intelligence, Comprehensive Analysis, Historical Data, and Forecast for 2023 - 2032

Market Perspective

The global Automotive Financing Market was valued at USD 260.38 billion in 2022 and is expected to reach USD 490.38 billion by 2032 with a compound annual growth rate of roughly 6.7% between 2023 and 2032.

The electric vehicle market has become a key driver of growth in the automotive financing industry, with a surge in demand for EVs fueling the expansion of this market. In 2022, electric vehicles and fleets accounted for 2.2% of global automotive production, but this ratio is expected to grow exponentially in the coming years due to green initiatives taken by countries worldwide.

Captive automobile finance, or OEMs, has emerged as a significant player in the global auto financing market, offering financial assistance or loans to consumers. Major automotive manufacturers like Honda, Nissan, Ford, and Mercedes have opened captive finance entities to assist their customers. This has increased competition among banks and other financial institutions, leading to further market expansion.

The growth of the automotive financing market is also being fueled by digitalization, internet penetration, and the increasing demand for automobiles, particularly in developing countries. The market is segmented into vehicle type, provider type, and finance type, allowing for further fragmentation. The North America and Asia Pacific regions have been the most prominent contributors to the growth of the market. However, further developments are anticipated in the Middle East and Latin American regions.

Key Insights

• Based on the provider type, the banks segment held the largest market share
• Based on vehicle type, the personal segment dominated the market
• Based on finance type, the direct loans segment generated the highest revenue
• On the basis of region, Europe accounted for the largest market share

Rapid Digitalization Offers Lucrative Opportunities for Credit Providers

Technological developments have led pathways toward digital applications, the availability of services through online portals, and mobile-based applications. It provides consumers with better outlook options and guides them in comparing their options with other offers available. This feature has significantly increased online loan applications as compared to traditional approaches. Banks, OEMs, and other financial institutions have started offering online services owing to the response received from consumers. Financial institutions in developing countries play the most crucial role in generating revenues owing to rising demand for automotive and increasing levels of per capita disposable incomes.

Developing Regions to Offer Exponential Revenue Opportunities

Developed countries observe a saturation point in the sale of automobiles as compared to developing countries. A remarkable increase in automotive fleets and personal utility vehicles is majorly observed in developing countries owing to increasing levels of income, urbanization, and industry opportunities attributing to further development and growth.

For instance, India being a developing country portrays immense demand from the automotive sector owing to developments in the industrial, business, and corporate sectors. The increase in demand for automobiles directly attributes a positive impact on the automotive financing market revenue.

Recent Developments

In October 2021: United Auto Credit Corporation was acquired by Vroom, a retailer of used cars serving an online portfolio. The deal was valued at USD 300 million. The car retailing company and credit provider company will integrate their respective services.

In September 2021: F1 Holdings Corp. and Stellantis N.V. signed an agreement wherein Setllantis N.V. will acquire First Investors Financial Services Group. The deal was worth USD 285 million. The acquisition aimed to set up a financial services partnership with the company and further expand the product portfolio.

In June 2021: Warburg Pincus, a private equity firm, enter into an agreement to acquire Exerter Finance. Exerter finance is amongst subprime lenders of credit. Any parties did not disclose the value of the acquisition as of the date. Blackstone manages the funds of Warburg Pincus.

Segmentation Analysis

By vehicle type, the automotive financing market is further segmented into commercial and personal vehicles. Personal vehicles, such as passenger cars, account for over 57% of revenues in this segment. The rise in urbanization, development of rural areas surrounding metropolitan cities, and an increase in the number of businesses have significantly increased the demand for personal vehicles globally. Automotive manufacturers are continuously adding innovative features and safety systems to keep up with the evolving industry. The addition of cosmetic features like enhanced car systems and drive assistance has further driven the demand for personal vehicles.

Developing countries are generating a significant portion of revenues in the automotive financing market due to steadily increasing disposable income levels and lucrative services provided by financing companies. India has surpassed Japan to become the third-largest automotive market in the world. Commercial vehicles are also anticipated to grow substantially through the forecast period, driven by lucrative offers and services provided by financing companies. The demand for commercial cars is directly impacted by developments in business and industrial markets.

by provider type, the automotive financing market is further segmented into banks, OEMs, and other financial institutions. The banks segment dominated globally in 2022, as banks have been the traditional finance providers for consumer needs and have been preferred by consumers for a long time. With increasing competition among financiers, banks are adopting dynamic strategies to stay ahead. Digitalization has also played a crucial role in providing convenience to consumers and driving revenue growth. In 2022, banks providing loans accounted for more than 53% of revenues.

However, the market is expected to shift as changing consumer preferences and lucrative strategies put in place by OEMs are estimated to drive the automotive financing market share for OEMs through the forecast period.

Based on finance type, the market is further categorized into direct loans and indirect loans. Direct type held more than 56% of the global market. These types of finances are cheaper as compared to indirect loans owing to the omission of the third party and hidden charges therein. In this case, the consumer has full control over the terms & conditions, repayment options, and tenure. Direct loan-type financing is anticipated to dominate through the forecast period.

Europe to Dominate the Market due to the Presence of Numerous Automotive Financing Services

In 2022, Europe held the dominant position, accounting for more than 37.6% of total revenues due to the rising demand for automobiles. Recent developments in the sector have further accelerated the growth of automotive financing in Europe. Germany, the U.K., France, and Italy are the prominent countries contributing majorly to the regional market revenue.

In addition to this, prominent companies have started providing their services through online channels such as online payments, or financing options owing to shifts in consumer preferences and rapid developments in IoT. This strategy has proved more advantageous than companies providing services in traditional ways. Top automobile companies in Europe such as BMW, Mercedes, and VW amongst others have started offering financing services to attract consumers and provide multiple benefits therein. Europe has the largest number of top automobile manufacturers in the whole world.

Asia Pacific to Observe Highest Growth due to Rising Population and Increasing Disposable Income Levels

Asia Pacific has experienced significant growth in the automotive financing market in recent years, driven by increasing manufacturing capacity, growing population levels, and demand for vehicles in the region. China is the largest manufacturer of cars in the world, followed by India, and the increase in demand for automobiles has directly accelerated the demand for financial service providers.

Traditionally, banks were the primary providers of finance, but the increasing demand for automobiles has led to the entry of private and new players in the market, offering different services for different types of vehicles. In India, government policies and interest rates have been encouraging for credit lenders, resulting in exponential growth in the number of private players offering financial aid to consumers through various types of financing.

This trend is expected to continue, with the automotive financing market in the Asia Pacific region projected to experience substantial growth in the forecast period. As the region's economies continue to develop and disposable income levels rise, the demand for automobiles and associated financing services is expected to increase further.

Competitive Landscape

• ALLY FINANCIAL INC.
• Bank of America Corporation
• BAJAJ FINSERV
• BANQUE PSA FINANCE
• Capital One
• General Motors Financial Company, Inc.
• JPMorgan Chase & Co.
• Mercedes-Benz Group AG
• Toyota Financial Services
• Volkswagen Finance Private Limited

The global Automotive Financing market is segmented as follows:

By Provider Type

• Banks
• OEMs
• Others

By Form

• Commercial
• Personal
• Others

By Finance Type

• Direct Loans
• Indirect Loans

By Region

• North America
  • The U.S.
  • Canada
  • Mexico
• Europe
  • France
  • The UK
  • Spain
  • Germany
  • Italy
  • Nordic countries
    • Denmark
    • Finland
    • Iceland
    • Sweden
    • Norway
  • Benelux Reunion
    • Belgium
    • The Netherlands
    • Luxembourg
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • New Zealand
  • Australia
  • South Korea
  • Southeast Asia
    • Indonesia
    • Thailand
    • Malaysia
    • Singapore
    • Rest of Southeast Asia
  • Rest of Asia Pacific
• The Middle East & Africa
  • Saudi Arabia
  • UAE
  • Egypt
  • Kuwait
  • South Africa
  • Rest of the Middle East & Africa
• Latin America
  • Brazil
  • Argentina
  • Rest of Latin America