Growing penetration of captive automotive finance, availability of loan benefits by governments for electric vehicles, and rising digitalization in the automotive loan are the leading factors driving the Automotive Loan Market during the projected period. According to the TechSci Research report, “Automotive Loan Market– Global Industry Size, Share, Trends, Competition, Opportunity, and Forecast, 2018-2028F”. The global automotive loan market is expected to grow faster during the forecast period as people prefer cars to commute as a convenient method in most places. Digital lending services are one of the most innovative technologies that are currently gaining popularity in the market for automotive loans, the introduction of progressive technology, such as electric automobiles, connected cars, and driverless cars, will promote automotive loan market expansion.
The Important Factors of the Automotive Loan Market
A commercial vehicle loan is a particular kind of loan that enables both private buyers and companies to buy commercial vehicles. Despite being similar, a car loan is exclusively meant for personal vehicles. Loans for commercial vehicles are typically used to pay for the purchase of automobiles for business use. There are different criteria for availing loans for different vehicles and the loan will only sanction when a borrower meets the given criteria of the financier.
Additionally, to effectively support automated decisions, many automotive loan companies are upgrading their LOS (Loan Origination Software) systems. Lenders benefit from quicker response and processing times by using LOS systems. Additionally, financiers can quickly approve or reject online applications owing to automated decision-making and loan structure.
One of the main factors fueling the expansion of the automotive loan market is the rising demand for automotive refinancing on a global level which offers a lower interest rate on an existing loan of an individual. Refinancing is becoming more popular as a result of its advantages, which include lower monthly auto payments, lower interest rates, and shorter loan terms. For instance, a fintech company named Rate Genius presented figures showing that 16.0% more Americans applied to refinance their vehicle loans in 2020.
According to the report from a digital lending company, the third-largest debt sector, after mortgages and student loans, is auto loans. American vehicle loan debt totals USD1.46 trillion, or 9.4% of all consumer debt in the county. Americans take more than $60 billion in new auto loans each month on average. Americans under the age of 50 take $37.9 billion in monthly auto loans, compared to those over the age of 50 who take $21.0 billion in auto loans. Most retail auto finance is provided by borrowers with ideal credit scores.
Based on the financier, the banks’ segment is anticipated to have significant expansion during the forecast period, as banks provide secure credit to their consumers. Customers have the option to apply for preapproval through banks as well. The ability to compare predicted loan offers is helpful for customers. Previously, banks would only finance between 70 and 80% of the total cost of the vehicles. However, the banks are now providing 100% financing for the vehicle.
Over the projected period, the OEMs category is anticipated to grow at the fastest rate, due to the better after-sales services which include the availability of similar vehicle parts, including those from the financed vehicle, for repair or replacement. Additionally, OEMs are seen as the drivers of new business models and the future of mobility. Additionally, OEMs are focusing on providing automotive loans through their captive financing firms in addition to their other products and services.
Based on region, Europe dominated the automotive loan market with the largest share. This emerges from the dominance of companies offering financing services for automobiles. Additionally, the region’s strong advertising sector has raised people’s awareness of automotive loan plans, which has increased demand for the automotive loan in the region.
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The automotive loan market is segmented on the basis of vehicle type, provider type, percentage of amount sanctioned, and tenure. On the basis of vehicle type, the market is divided into two-wheeler, passenger cars, and commercial vehicles.On the basis of provider, the market is segmented into banks, NBFCs (non-banking financial services, OEM (original equipment manufacturers), and others (fintech companies). Based on the percentage of the amount sanctioned, the market is segmented into less than 25%, 25-50%, 51-75%, and more than 75%. On the basis of tenure, the market is segmented into less than 3 years, 3-5 years, and more than 5 years. On the basis of region, the market is divided into North America, Europe, Asia-Pacific, South America, and Middle East & Africa.
Key market players in the global automotive loan market include:
- Ally Financial Inc.
- Bank of American Corporation
- Daimler Financial Services
- Capital One Financial Corporation
- Ford Motor Credit Company
- GM Financial Inc.
- Mitsubishi HC Capital UK PLC
- General Motors Financial Company, Inc.
- Toyota Financial Services
- JPMorgan Chase & Co.
Various international and domestic companies are trying to enhance their market reach by increasing their merger and acquisition. For instance, in 2020 the two biggest leasing companies of Japan, Mitsubishi UFJ Lease & Finance and Hitachi Capital declared their merger by April 2021. To increase their market share, Hitachi Capital and Mitsubishi UFJ Lease & Finance plan to broaden their operations globally.
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“The rising demand for new vehicles and used vehicles witnessed significant growth in emerging economies across the globe. Owing to the rising vehicle prices, vehicle buyers are opting for monthly loan payments which are driving the automotive loan market. Additionally, with the emergence of new banking financial companies which are providing minimum zero down payment loan schemes with low-interest rates and EMIs are enticing consumers to avail loans to buy vehicles which is driving the car loan market,” said Mr. Karan Chechi, Research Director with TechSci Research, a research-based global management consulting firm.
“Automotive Loan Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, 2018-2028F, Segmented By Vehicle Type [Two-Wheeler, Passenger Car, Commercial Vehicle], By Provider Type [Banks, NBFCs (Non-Banking Financial Services, OEM (Original Equipment Manufacturer), Others (Fintech Companies)], By Percentage of Amount Sanctioned [Less than 25%, 25-50%, 51-75%, More than 75%], By Tenure [ Less than 3 Years, 3-5 Years, More than 5 Years], By Region, Competition, Forecast & Opportunities, 2018-2028F”, has evaluated the future growth potential of the automotive loan in the global market and provides statistics and information on market structure, size, share, and future growth. The report is intended to provide cutting-edge market intelligence and help decision-makers take sound investment decisions. Besides, the report also identifies and analyzes the emerging trends along with essential drivers, challenges, and opportunities present in the global automotive loan market.
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