Car financing refers to the financial alternatives made available by various institutions for consumers to empower them to buy new or used cars. They can acquire cars through options other than a lump-sum payment one. This type of financing is provided by car manufacturers or financing companies allowing them to purchase a car without having to pay cash completely. The loan segment has a larger industry share than leasing, but leasing is projected to grow at a high CAGR.
The global car finance industry size is projected to show growth due to rise in trends in automobiles and consumer preferences in owning a car. Tremendous demand for owning a branded automobile is fuelling car financing industry. Asia Pacific is estimated to have the highest CAGR in the forecast period. Non-financing institutions providing the car financing at less demanding eligibility criteria and flexible repaying periods can act as lucrative opportunities for first-time buyers and can fuel car finances.
COVID-19 Impact: Financial Unpredictability Led To Deterioration of Demand For Car Finances
The outbreak of COVID-19 pandemic affected each and every sector in a way. It caused a slowdown in the automobile industry caused by a downfall in capacities of production and car sales. However, recovery from the pandemic is done by creating new revenue opportunities owing to the expansion of B2C digital channels at the time of lockdown. In addition to these factors, owing to pandemic car lenders have been forced to adapt to activities like refinancing and extensions.
Segmentation
Based on source type, the industry is divided into bank, OEM, and financial institution.
According to vehicle type, the industry is divided into new car and used car.
On the basis of purpose, the industry is divided into lease and loan.
Geographically, the industry is divided into regions such as North America, Europe, Asia Pacific, and the Rest of the World.
Reduction in Leasing Process Time to Promote Growth in Demand
Car finance industry growth is driven by factors such as reduction in time taken for purchasing or leasing any vehicles, which has prompted the drive to buy cars for the first time, increasing cab financial services, and swift and hassle-free process. Also, increasing investments and support for financing institutions and banks are contributing to growth of this industry.
On the contrary, factors like financial irregularities amongst consumers causing delay in purchasing cars, pandemic led lockdowns causing decline in demand for such cars and finances, and financing companies managing to survive the times of pandemic are restraining factors in car finance industry. In addition to these factors, owing to pandemic car lenders have adopt to activities like refinancing and extensions.
Asia Pacific to Have Commendable CAGR Owing to Government Initiatives
Asia Pacific is anticipated to have a considerable CAGR in the forecast period due to government initiatives that can motivate production in the regions and demand for SUVs in countries like China and India leading this region for an increased car finance industry share.
Europe is also expected to head towards valuable growth as existing players are focusing on offering services through digital/online channels giving them an edge in the industry over other players.
North America is also projected to show industry growth accounted by demand for car financing facilities for first-time buyers and low-income families in this region.
Industrial Developments:
December 2021: Kotak Mahindra Prime, a subsidiary of Kotak Mahindra Bank has obtained the financial portfolio for the passenger car segment of Ford Credit India. This acquisition is done with the motive of growing Kotak’s vehicle’s financing presence.
List of Key Players Present in the Industry
- Bank of America (U.S.)
- Ally Financial (U.S.)
- Daimler Financial Services (Germany)
- Hitachi Capital (U.K.)
- Ford Motor Credit Company LLC (U.S.)
