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 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.
Market Drivers:
The car finance market is expected to witness substantial growth during the forecast period. This is attributed to rise in consumer trends & preferences toward car purchases which have increased tremendously. The increase in the demand for model & branded cars worldwide has become one of the major growth factors in the market. Car finance options range from traditional bank loans and hire purchase agreements to newer models like leasing and peer-to-peer financing. In addition, the 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, the car finance market is expected to offer several opportunities for new players in the market. Rise in demand for electric vehicles (EVs) as consumers are increasingly opting for environmentally friendly options, offering significant opportunity for financial institutions to provide specialized financing options tailored for EVs, such as longer-term loan packages or favorable interest rates. In addition, the government's initiatives in offering subsidies or tax credits for EVs, make them more affordable. Car finance providers can collaborate with these programs to provide attractive financing terms, thereby further encouraging the adoption of EVs, accelerating car finance market growth.
For instance, on February 8, 2023, Bank of America announced to offer consumers the option to finance residential electric vehicle chargers alongside auto loans. This move aimed to meet growing demand for convenient EV solutions. The bank collaborated with over 10,000 dealers and multiple EV manufacturers nationwide.
Furthermore, the rise of digital transformation in the finance industry has led car finance providers the remunerative opportunity to offer online car financing solutions, improving accessibility, reducing processing times, and enhancing the overall consumer experience. In addition, the development of mobile apps for car finance provides consumers with a convenient way to apply for loans, manage payments, and receive personalized offers, thereby enhancing customer engagement and simplifying the loan management process. This is expected to offer lucrative opportunities for the growth of the car finance market.
For instance, 03 Mar 2023, Mahindra & Mahindra Financial Services launched 'Used Car Digi Loans' in partnership with Car&Bike and Rupyy. This digital journey offered customized loan offers, enabling faster buying decisions. The integrated system initiated loan applications quickly, disbursing loans within hours. Ramesh Iyer highlighted the seamless and transparent experience for customers and partners.
Moreover, the surge in the adoption of personalized financial solutions enables providers to provide tailor loan terms (loan duration, interest rates, and down payment) based on the individual credit profile, preferences, and needs of the customer. In addition, the strategic partnership with automakers enables to provide joint financing options, offering consumers special deals with lower interest rates or longer repayment terms. This is expected to provide immense opportunities for the growth of the car finance market.
For instance, on Jul 17, 2024, Mercedes-Benz Financial Services launched the 'Wishbox' campaign in India, offering personalized financial solutions like Step-Up EMI, Easy Annual Benefit, and EMI Holiday. These options aimed to ease the financial burden and make owning a Mercedes-Benz more accessible.
Market Trends Insights
The car finance market is expected to witness several noteworthy trends. One of the significant trends is the integration of AI and ML which are streamlining the loan application process by enabling car finance providers to analyze consumer data more effectively, predict creditworthiness with greater accuracy, and approve loans faster. In addition, the shift in preference toward blockchain technology enables the use of smart contracts, which automatically execute the terms of a loan agreement when certain conditions are met. This reduces the administrative burden and helps prevent errors or disputes related to the financing process.
Another notable trend the market is expected to witness is the increase in the adoption of alternative financing models like peer-to-peer (P2P) lending and crowdfunding lending in the auto loan market. P2P lending allows borrowers to secure loans directly from investors, offering competitive interest rates and flexible terms without traditional financial intermediaries. Crowdfunding platforms provide a community-driven approach to car financing, particularly benefiting buyers with limited credit access. With the rise of ride-sharing services like Uber and Lyft, car finance providers are exploring financing options for vehicles used on these platforms. Integrating car-sharing and ride-hailing models into financing solutions offers consumers more flexibility in vehicle usage and ownership. In addition, there is growing trend toward shorter repayment periods as consumers seek quicker financial freedom and reduced debt burden, driven by more options for leasing and subscribing to vehicles. This is expected to drive the growth of the car finance market in the upcoming years.
Car leasing is another significant trend in the car finance market. Consumers prefer driving new cars without the long-term commitment of ownership, allowing for lower monthly payments and frequent upgrades to newer models. This trend is driven by rising vehicle prices and the desire for a hassle-free ownership experience. In addition, businesses are adopting leasing options for their fleets, benefiting from financial flexibility and the ability to change vehicles regularly without worrying about depreciation costs. In addition, there is shift in preference toward vehicle refinancing, allowing car owners to adjust their auto loans for better interest rates or repayment terms, appealing to those looking to reduce monthly payments or benefit from market changes.
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 market.
Application Insights
The car finance industry serves various consumer and business needs. For private consumers, auto loans and leasing provide adaptable financial options for buying or renting vehicles, making it easier to own a car. Vehicle refinancing is gaining popularity among consumers aiming to lower their monthly payments or obtain improved loan conditions. Companies, especially those involved in logistics, transportation, and fleet management, take advantage of fleet financing and leasing solutions, which help them efficiently manage their vehicle fleets without incurring ownership costs. Furthermore, the emergence of alternative financing options like peer-to-peer lending and crowdfunding is expanding access to car finance, especially for individuals with limited credit options. These developments are reshaping the market by delivering more customized, accessible, and flexible financial solutions to a wide variety of customers.
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 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.
Key Companies & Market Share Insights
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.
Recent Product Launches/ Collaborations in Market
On March 11, 2025, State Bank of India (SBI) launched a low-cost, customized vehicle loan product for Uber’s fleet partners. The partnership aimed to leverage SBI’s financial network and Uber’s technology to help fleet partners expand their operations. This collaboration supported both new and existing Uber fleet partners by providing affordable financing solutions and hassle-free disbursement.
On September 18, 2024, OLX partnered with IDFC FIRST Bank to offer used vehicle financing on its platform. This collaboration allowed OLX customers to access financing options for pre-owned cars and bikes directly through the website. Amit Kumar of OLX India highlighted the expected growth of the pre-owned car financing market. Rishi Kant Misra of IDFC FIRST Bank emphasized the goal of making financial solutions more accessible with a digitized loan process.
On January 23, 2023, Metro Bank launched a digital car loan product under its Ratesetter brand for used cars. The paperless application process provided instant approvals, allowing customers to drive off the same day. Lloyd Collett emphasized quick, reliable decisions through Ratesetter technology. The first brokers to pilot the product were CarFinance 247 and Motion Finance, with plans to add more partners soon.
On Mar 08, 2025, Maruti Suzuki India Limited (MSIL) signed a Memorandum of Understanding (MoU) with Hero FinCorp Limited to enhance financing options for new and pre-owned car buyers. The partnership aimed to leverage Maruti Suzuki’s dealership network and Hero FinCorp’s financial solutions to make car ownership more accessible. This collaboration aimed to offer innovative and attractive financing solutions, catering to a diverse customer base across India.
By Distribution Channel
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. The car finance process involves assessing creditworthiness, choosing a loan type, and finalizing the payment plan through lenders or financial institutions. 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. Penetration of car finance in developing countries is accelerating due to growing middle-class populations and increased access to financial services. As a result, these huge prices imposed over average price of vehicles are anticipated to boost growth of the market during the forecast period.
By Vehicle Age
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. The expansion of the car finance market is driven by increasing vehicle ownership, rising disposable income, and innovative financing options.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.
By Region
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 forecast 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 |
 By DISTRIBUTION CHANNEL |
|
 By VEHICLES AGE |
|
 By APPLICATION |
|
 By PURPOSE |
|
 By Region |
|
 Key Market Players | Ford Motor Company, General Motors Financial Company, Inc., JPMorgan Chase & Co., Hitachi Capital Corporation, Capital One, Ally Financial Inc., Bank of America Corporation, Toyota Financial Services, Volkswagen Finance Private Limited, Daimler AG |
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.
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