November 29, 2023

Car Auto Finance

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Automotive Finance Market size to hit $455 Bn by 2033;

New York, June 06, 2023 (GLOBE NEWSWIRE) — The automotive finance market size is anticipated to surpass USD 455 billion by 2033 and is projected to attain 7% growth rate till 2033, as per latest study by Research Nester.

The industry growth is attributed to the increasing demand for automobiles backed by the growing population. Auto finance has made it possible for consumers to take out a loan to purchase a car if they do not have the money, thus increasing the trend of adopting auto finance worldwide to own a car for convenience. For instance, according to statistics, more than 80% of its new cars put on US roads in 2019 were financed by lease or loan. Auto finance, also known as auto finance, car finance, or car finance, allows individuals to raise the necessary funds and borrow money to buy a car. A collection of many financial products, such as car loans and leases, that are useful for those who cannot afford to pay all in cash.

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Global Demand for Auto Loans is Expected to Drive Market Growth

As the population grows, the demand for automobiles is increasing every year. As a result, more people are taking out auto loans to buy new cars. The market is expected to escalate during the forecast period owing to the ease of choosing auto finance with easy EMI options and digital approvals. For instance, it was noted that US auto loans reached nearly USD 1 trillion in the year 2019, up 6.5% from the year 2018. Hence, this is anticipated to be a prime factor fueling the growth of the global automotive finance market, notably over the forecast period. When financing a vehicle, the financial institution grants the purchaser a loan to purchase the vehicle through a contractual agreement. However, in return for the loan, the buyer is entitled to pay the lender interest and fees on the money borrowed over a specified number of years. Auto finance financial institutions include banks, credit unions, online lenders, car companies, car dealers, and others. Auto loans from credit unions or banks are considered cheaper as the interest rates are lower than dealer loans, where interest rates rise toward the end of the repayment period.

Presence of Major Automotive Finance Providers to Drive Market Growth in North American Region

The North America automotive finance market is estimated to garner the largest revenue by the end of 2033. The presence of major automotive finance providers, along with increasing vehicle production in the region, is a major factor expected to drive market growth. According to statistics released by the International Automobile Organization (OICA), automobile production in the American region has increased from about 15 million in 2020 to 16 million in 2021. Demand for vehicle financing for vehicle purchases is expected to increase over the next few years owing to the rapid adoption of advanced vehicle technologies and the increasing demand for electric, connected, and autonomous vehicles. Some car dealerships also provide financing through their own companies, commonly referred to as “in-house financing.” This type of dealer is not considered cheap, as the interest rate charged by the buyer is significantly higher than that of other types of lenders and dealers.

Spiking Expansion of the Automotive Industry to Propel Growth in the Asia Pacific Region

The automotive finance market in the Asia Pacific region is estimated to garner the highest CAGR by the end of 2033. The growth of the market in this region can primarily be attributed to the spiking expansion of the automotive industry in the region. Other factors contributing to market growth are favorable government policies on car purchases in economies such as India, Japan, and China; increasing disposable income leading to increased purchasing power; and increasing gross domestic product (GDP). The automotive finance market growth in this region can also be attributed to the huge population throughout the region. According to the International Energy Agency, the World Bank reports that the population of East Asia and the Pacific reached 2.37 billion by 2021, making China the largest producer of vehicles. In addition, the region is becoming more urbanized, increasing traffic congestion and CO2 emission limits.

Market Segmentation by Vehicle Type
(Passenger Vehicles, Commercial Vehicles)

The passenger vehicles segment is anticipated to hold the largest share of the global automotive finance market during the forecast period. The growth of the segment can be attributed to the fact that as the sales of passenger cars increase worldwide, the demand for passenger cars is increasing. For instance, it was noted that global passenger car sales in the year 2020 reached about 63 million units. Profitable financing solutions offered by various financial institutions are aimed at individuals who want to purchase or lease a vehicle on their own with great convenience. Therefore, even customers with limited income sources are interested in purchasing a car for their daily commute. All these factors lead to profitable opportunities for segment growth. On the other hand, a significant share is also attributed to the commercial vehicle segment by the end of the forecast period. Commercial vehicles cost more than passenger cars, so people use vehicle finance to buy commercial vehicles. Vehicle modification or vehicle upgrade benefits in leasing commercial vehicles via vehicle financing also contribute to the segment’s growth. 

Market Segmentation by Provider (Original Equipment Manufacturers, Banks, Financial Institutions)

Automotive finance market from the banks segment is anticipated to hold a significant share over the forecast period. The main factors attributed to the growth of the segment are the hassle-free documentation process and reliable features. In addition, increased adoption of digital methods of auto finance in the banking sector has simplified processes and improved acceptance rates. In addition, low interest rates compared to other providers should guarantee a positive future outlook. In addition, steadily growing numbers of commercial banks are also estimated to be a positive factor influencing segmental growth. For instance, as of 2022, there were more than 10,330 commercial banks worldwide.

Major players in the global automotive finance market are Axis Auto Finance Inc., Bank of America Corporation, Genpact, General Motors LLC, PricewaterhouseCoopers LLP, Ally Financial Inc., Mitsubishi HC Capital UK PLC, and others.

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