France automotive loan market is witnessing robust growth with the constantly rising cost of vehicles, because an automotive loan is considered the best method for buying a car. It offers several benefits and, when compared to other forms of loan, automotive loan has a more enticing rate. However, like any loan agreement, it is governed by laws whose goal is to keep customers from being overly indebted.  In France, the Consumer Code has set the maximum car loan amount at 75,000 euros and the total repayment time at 84 months, for new car purchases. Therefore, it stands to reason that more people are using automotive loans to finance the purchase of new vehicles, driving the growth of automotive loans in France during the forecast period.

The process of purchasing a vehicle involves considering several factors to calculate the credit rate. It is essential to consider the duration and amount of the credit, the borrower's financial and professional status, the establishment's profit margin, the type of vehicle, etc., for the loan to be considerable. Generally, the lender lends the money, and the borrower must return the loan in equated monthly installments (EMIs) over a defined tenure, at a specific interest rate. In France, the maximum loan amount is USD79,599, and the minimum loan term is three months. The automotive loan is primarily provided through banks, NBFCs (non-banking financial services), OEM (original equipment manufacturer), and others (fintech companies) over a specified tenure and interest rate.

According to the French automotive market in September 2022, in partnership with NGC, the data revealed that around 141,155 units of passenger cars were sold in September 2022. MarkLines’s 2021 data shows that approximately 1.659 million automotive vehicles were sold in 2021, in France. According to a survey by Crédit Agricole Consumer France, 56% of all French households that used consumer credit, did so to pay for the purchase of a new car. As a result, the French automotive loan market will be driven by automobile or vehicle sales during the forecasted years.

Expansion of Low Emission Vehicles Fueling the Market Growth

Low-emission mobility zones (ZFE-m) are being established in French cities as a part of the campaign against global warming. The most polluting cars are not allowed access to these zones. Some low-income families and small enterprises located in that area could be significantly impacted by the implementation and extension of ZFE-m, concerning purchasing a clean vehicle. For instance, in low-emission mobility areas of France, zero-rate loans for buying an electric or hybrid car will begin in 2023 for two years as an experiment. The loan can be up to USD31846.80 with a 7-year repayment period for a vehicle worth a maximum of USD47770.20 or USD63693.60, for a van. Those whose taxable income does not exceed €14,000 per year and micro-enterprises are eligible for this interest-free loan. Therefore, with the expansion of low-emission or electric vehicles, the demand for automotive loans will increase in France during the forecast years.

Changes within the Consumer Base Fuels Market Growth

During previous financial contractions, consumers avoided unnecessary expenditures and boosted their savings as they prepared for more challenging times in future. Due to the sharp fall in private vehicle sales, these patterns were already evident with COVID-19. France is evolving into a predominantly urban country, having widely separated living and working zones, which explains the expansion of multi-motorization. The imbalance between supply and demand is accounted for by the increasing prices of cars by manufacturers. According to research by the Automotive Club Association, the average annual automotive expenditure in France is above €6,000. According to the French Association of Financial Companies (ASF), the weight of personal auto financing, including car loans, rentals, and leases with the option to purchase, amounts to almost one billion euros per month. This is nearly a third of the total amount of consumer loans granted annually in France. Therefore, the automotive loan is rising with the rise in automotive sales in France.

Increased Use of Direct Digital B2C Channels Fuel Market Growth

The pandemic has already pushed the expansion of digital and online platforms for business-to-consumer (B2C) sales. Following these trends, OEMs and other financial institutions have also started virtualizing their businesses and operating remotely. Thus, digital technologies are reshaping payments, lending, etc., in automotive loans. For instance, with the help of digitalization in the automotive loan industry, lenders can track the profile of potential borrowers and the repayment capacity of borrowers. Digitalization gives consumers more options and a better understanding of interest rates and prices from different financial institutions. This transformation has made the environment more competitive and transparent. Therefore, the automotive loan market has been driven by the rise of digital culture to create new solutions to meet the demands of vehicle buyers in France.