Automotive Finance Market Trends

Growth Drivers

• Growing Demand for Automotive Loans – With the rising population, the demand for vehicles has also been increasing every year. As a result, more and more people are now opting for car loans to buy a new vehicle. Owing to the ease of opting for automotive finance with easy EMI options and digital approvals, the automotive finance market is expected to escalate in the forecasted period. For instance, it was found that in the United States, auto loans reached around USD 1 trillion in 2019, an increase of 6.5% over 2018.
• Increasing Global Sales of Automobiles – International Organization of Motor Vehicle Manufacturers (OICA), released global sales of vehicle statistics which revealed that it rose to 56 million in 2021 from 53 million in 2020. Whereas, the global production of vehicles was calculated to be 57 million in 2021.
• Rising Share of Financial Services – Latest statistics reveal that with global GDP touching USD 96 trillion in 2021, financial services were found to comprise almost 24% of the world's economy 2021.
• Upsurge in the Financing of Used Cars – A recent report stated that in the United States, nearly 55% of used cars on the country roads in 2019 were financed with a lease or a loan.
• Increasing Number of Vehicles Being Financed – In the United Kingdom, the number of cars bought on finance in 2018 exceeded 2.2 million, a rise of about 2% from 2017.

Challenges

• Fluctuating Interest Rates – The inflation trend across the world has propelled financial institutions to charge a higher interest cost. In addition, some of the financial products of automotive financing are subject to fluctuation in interest rates. As a result, the adoption rate of automotive finance market is expected to be low in underdeveloped countries and among the population with middle income. This trend is thus anticipated to hamper the market growth in the forecast period.
• High Cost of Operations
• Lack of Faith & Transparency