Market Trends of Automotive Financing Industry
This section covers the major market trends shaping the Automotive Financing Market according to our research experts:
Banks Across the World to Gain Significant Prominence During Forecast Period
The provision of car finance, usually by banks, allows consumers to pay the dealer or manufacturer even if they do not have the money. In other words, car finance allows the consumer to buy a car by borrowing money to pay the seller.
Banks are leading the source-type segment of the automotive financing market as they provide lower interest rates to their customers. Auto financing penetration in passenger vehicles increased from 75% at the beginning of 2020 to around 80% in 2021 due to many options available from banks to use cash for cars. According to auto financiers and dealers, the current trend is driven by bank aggression. However, the increase is limited to passenger vehicles and excludes two-wheelers or commercial vehicles.
Due to the rising interest rates and auto prices, an increasing number of car buyers in the United States are opting for monthly loan payments of USD 1,000 or more. According to Edmunds, 14.3% of consumers who financed a new vehicle in the third quarter committed to payments at or above the mentioned amount, up from 8.3% the previous year. This figure is 26% for electric vehicle purchasers and 24% for hybrid purchasers.
Car financing penetration across banks has also improved in the last two quarters, with improved turnaround time and a decrease in the rejection rate of loans.
Asia-Pacific is Expected to Lead the Automotive Financing Market
In the Asia-Pacific region, the automotive financing market is already matured. The growth of electric vehicles in Asia-Pacific countries is also expected to remain a major driving factor for the market's growth. For example, in 2021, sales of battery electric vehicles in China were 2.9 million units, a significant increase from the 1.1 million units sold in 2020. To encourage the adoption of electric vehicles, governing bodies throughout Asia-Pacific are focusing on the ease of financing availability, which may aid the market during the forecast period.
Over the forecast period, Asia-Pacific is expected to be the fastest-growing regional market. The increasing number of favorable government initiatives in economies such as India, Japan, and China to promote the automotive industry's growth and maintain consumer interest is expected to create opportunities for the growth of the regional market. For instance,
- In August 2022, the Japanese government announced the provision of unprecedented subsidies to help popularise electric vehicles (EVs). For the fiscal year ending in March 2024 (FY 2023), the Ministry of Economy, Trade, and Industry will develop a budget request of approximately JPY 41 billion to support electrified vehicles and the charging infrastructure business, which is expected to be double the initial budget for FY 2022.
