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2020

Car Finance Market

Car Finance Market Size, Share, Competitive Landscape and Trend Analysis Report by Distribution Channel, Vehicle Age, Application and Purpose : Global Opportunity Analysis and Industry Forecast, 2020-2027

BI : Financial Services

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Author's: Aarti Goswami| Pramod Borasi | Onkar Sumant
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Car Finance Market Outlook - 2027

The global car finance market size was valued at $1,290.7 billion in 2019, and is projected to reach $2,334.3 billion by 2027, growing at a CAGR of 14.3% from 2020 to 2027. 

Car Finance Market Insights

Car finance is provided by financing companies or specialist car manufacturers.  It includes various financial products such as loans & leases, which allows customers to obtain a car. Moreover, car finance products & services are primarily distributed through original equipment manufacturers (OEMs), banks, credit unions, brokers, and other financial institutions. Furthermore, car or auto financing are services allows borrowers to purchase vehicles without having to make the complete payment in cash.

Rise in consumer trends & preferences toward car purchases have increased tremendously and massive demand for model & branded cars worldwide has become one of the major growth factors in the market. In addition, increase in international auto manufacturers such as BMW, Toyota, Volkswagen, and Mercedes are meeting customer demands worldwide, which fuels growth of the car finance market. However, rise of car owners that provide rideshare services to customers as an alternative solution to travel by car hampers the market growth. 

In addition, consumers with long-term debts such as home loans has become a challenging factor for car finance providers to execute car loans, which as a result limits the market growth. Conversely, countries such as China, India, Japan, and Australia highly demand and often quote for car finances or loans, owing to increase in offerings of long-duration repayment options by 12 months to 3.5 to 4 years. Therefore, rise in benefits from car finances boost the market in Asia-Pacific and are expected to provide immense opportunities for the market in upcoming years. 

The banks segment dominated the car finance industry in 2019, and is projected to maintain its dominance during the forecast period. This is attributed to the fact that banks ensure easier availability of auto finance services and maintains brand loyalty for their product offerings in the market. 

The report focuses on growth prospects, restraints, and trends of the car finance market analysis. The study provides Porter’s five forces analysis to understand the impact of various factors such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers on the car finance market.

Segment Review

The car finance market is segmented on the basis of distribution channel, vehicle age, application, purpose, and region. In terms of distribution channel, it is segmented into banks, OEMs, credit unions, and others. On the basis of vehicles age, it is segmented into new vehicles and used vehicles. By application, it is segmented into personal vehicles and commercial vehicles. By purpose, it is bifurcated into loans and lease. Region wise, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. 

The report analyses the profiles of key players operating in the market include Ally Financial Inc., Bank of America Corporation, Capital One, Daimler AG, Ford Motor Company, General Motors Financial Company, Inc., Hitachi Capital Corporation, JPMorgan Chase & Co., Toyota Financial Services, and Volkswagen Finance Private Limited. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.

COVID-19 impact analysis

The car finance industry has recorded continuous investments for its developments and has become a massive contributor to the economic growth. However, this industry has been largely affected, owing to the outbreak of the COVID-19 pandemic leading to economic instability. In addition, owing to increase in unemployment & uncertainty in income results in lower demand and postponement of new car purchases or lease during the pandemic situation. Moreover, shortage in supply of raw materials and logistics has tremendously disrupted the supply chain of automotive new product launches, which, in turn, has led to the disruption in the market growth.

Car Finance Market
By Distribution Channel
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Banks segment accounted for the highest car finance in 2019.

Top Impacting Factors

Growth in Global Average Price of Vehicles  

Rise in massive demand for new car models and branded cars worldwide has become one of the major growth factors in the market. As consumer trends and preferences toward car purchases have increased tremendously, demand for car financing & loans is expected to rise and is expected to maintain its dominance in the market. Therefore, with rise in demand for cars, global average price of vehicles has increased simultaneously. Thus, massive rise in vehicle prices urge consumers to switch from direct purchases to auto or car finances in the market. 

For instance, in the U.S., average price of a new car purchased increased to $36,718 in 2019, from $35,742 in 2018, with interest rates hovering around 6% and 2%, respectively. As a result, these huge prices imposed over average price of vehicles are anticipated to boost growth of the +car finance market during the forecast period.

Car Finance Market
By Vehicle Age
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New Vehicles is projected as one of the most lucrative segments.

Rise in Demand for Vehicles  

Rise in advanced benefits from online car financing application systems and multiple options for vehicle purchases are the major growth factors in the market. In addition, rise in disposable income of consumers result in massive demand for car purchases. In addition, growth in international auto manufacturers such as Volkswagen, Mercedes, BMW, and Toyota are meeting customer demand worldwide. This, in turn, is anticipated to boost growth of the car finance market during the forecast period. For instance, in India, though the prices of vehicles tend to rise year-on-year, around 75% cars are purchased through loans & financing solutions. As a result, though prices of vehicle is increasing year-on-year, the consumers are still purchasing cars via financing & leasing services. 

Implementation of Technologies in Existing Product Lines 

Car finance providers are focused to offer value added services to their customers, expanding existing product & service offerings by implementing technologies such as artificial intelligence, business analytics, and blockchain are anticipated to help improve quality of services and increase the level of customer satisfaction. Furthermore, these technologies allow companies to structure new and used auto loans more accurately. Therefore, expansion of existing products & services by implementation of new technologies is expected to provide lucrative opportunities for car finance providers in the upcoming years.

Car Finance Market
By Region
2027
Asia-pacific 
North America
Europe
LAMEA

Asia-Pacific accounted for the highest revenue in 2019.

Key Benefits for Stakeholders 

  • The study provides an in-depth analysis of the global car finance market share along with the current & future trends to elucidate the imminent investment pockets.
  • Information about key drivers, restrains, and opportunities and their impact analysis on the car finance market size is provided in the report.
  • Porter’s five forces analysis illustrates the potency of the buyers and suppliers operating in the industry.
  • An extensive analysis of the key segments of the industry helps to understand the global car finance market trends.
  • The quantitative analysis of the global car finance market share from 2020 to 2027 is provided to determine the market potential.

Car Finance Market Report Highlights

Aspects Details
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By DISTRIBUTION CHANNEL
  • Banks
  • OEMs
  • Credit Unions
  • Others
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By VEHICLES AGE
  • New Vehicles
  • Used Vehicles
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By APPLICATION
  • Personal Vehicles
  • Commercial Vehicles
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By PURPOSE
  • Loans
  • .Lease
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By Region
  • North America  (U.S., Canada, Mexico)
  • Europe  (France, Germany, Italy, Spain, UK, Russia, Rest of Europe)
  • Asia-Pacific  (China, Japan, India, South Korea, Australia, Thailand, Malaysia, Indonesia, Rest of Asia-Pacific)
  • LAMEA  (Brazil, South Africa, Saudi Arabia, UAE, Argentina, Rest of LAMEA)
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Key Market Players

General Motors Financial Company, Inc., Volkswagen Finance Private Limited, Toyota Financial Services, Capital One, Hitachi Capital Corporation, Bank of America Corporation, Ford Motor Company, Daimler AG, JPMorgan Chase & Co., Ally Financial Inc.

Analyst Review

Car finance providers are looking forward to implement advanced technologies such as artificial intelligence (AI) and machine learning to track car loans and make decisions accordingly. In addition, key players are expanding their offerings to provide customized cars or auto finance for their customers. Moreover, consumer trends & preferences have changed, in terms of availing car finance product offerings by online channels in the market. Therefore, car finance providers have lucrative opportunities to innovate their existing channels and expand their product offerings in the untapped potential of emerging economies. Nevertheless, a considerable number of companies remain under the perception that they have minimum car finance exposure. However, this scenario is changing and 2019 has witnessed an increase in sales of car finance or auto loan, owing to higher demand of automobiles and increase in prices of vehicles in the market. Consequently, simple & streamlined online financing environments, adoption of technologies, and shift toward subscription & shared-ownership models of car finance has led to rise of new trends in the car finance industry.

The car finance market is fragmented with the presence of regional vendors. Some of the key vendors include Capital One, General Motors Financial Company, Inc., and Toyota Financial Services. Asia-Pacific dominated the car finance market, in terms of revenue, in 2019, and is expected to retain dominance throughout the forecast period. Owing to car financiers offering long-duration loan repayment options by 12 months to 3.5 to 4 years, which boosts growth of loan or financing of cars in the region. Furthermore, the car finance market is increasingly expanding mainly in countries such as China, Australia, Japan, India, Indonesia, New Zealand, and Singapore with high GDP growth and rise in per capita income. Some of the key players profiled in the report include Ally Financial Inc., Bank of America Corporation, Daimler AG, Ford Motor Company, Hitachi Capital Corporation, JPMorgan Chase & Co., and Volkswagen Finance Private Limited. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.

Author Name(s) : Aarti Goswami| Pramod Borasi | Onkar Sumant

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Car Finance Market

Global Opportunity Analysis and Industry Forecast, 2020-2027