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Forecast Period
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2024-2028
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Market Size (2022)
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USD160.51 Billion
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CAGR (2023-2028)
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6.30%
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Fastest Growing Segment
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OEM
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Largest Market
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South Region
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The automotive loan market is witnessing robust growth due to different
factors, such as dramatically rising prices of both new and used cars.
Government investment and development in online retail and logistics have
produced a more robust demand for commercial vehicles. The auto loan industry
is rising and experiencing significant expansion in the share of commercial
vehicles. Thus, the United States automotive loan market will boost globally in
the forecast period.
The automotive loan is provided by various financing companies, which
allows one to buy a vehicle. When an individual gets approved for the loan, the
lender will offer a certain amount of money which has to be paid back with
interest and over an agreed period. Based on vehicle, there is a segment of
two-wheeler loans that helps an individual buy a motorcycle and scooter and lay
it later with EMIs. Passenger car includes hatchback, sedan, SUV, and MPV. An
individual takes a loan to buy passenger cars. A commercial vehicle loan gives
borrowers money to purchase a vehicle for business use. Commercial vehicles
include trucks. Light-duty, medium-duty, and heavy-duty vans and buses are also
commercial vehicles. Additionally, 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 report of NADA (National Automobile Dealers
Association), 2022 from the previous year, light commercial vehicle sales in
the US increased by 7.9% on a yearly average to 14.1 million units, with hatchback
and pickup trucks accounting for over two-thirds of sales, Toyota, GM,
Stellantis, and Ford dominated the market. According to the MarkLines 2022,
around 12.05 million commercial vehicles were sold in the United States, and
3.3 million passenger cars were sold. Therefore, sales from heavy trucks and
passenger cars have been increasing, which, in turn, drives the growth of
automotive loans during the forecast period.
Surging Prices of Cars Fuels
the Market Growth
As the prices of cars
are increasing, consumers are pushing towards borrowing a loan to make a
purchase. Even though the Federal Reserve has been trying to moderate the
economy by raising interest rates, new vehicle costs in the US have been
growing higher than the rate of current inflation of the year. Due to
semiconductor supply chain constraints and other problems, automakers claim
they are still unable to keep up with demand. For instance, according to
Experian, loan data for 2022 demonstrate that as new vehicle prices rise, more
buyers choose used cars and trucks. During the second quarter, used automobiles
accounted for 61.8% of total vehicle loans, up from 58.5% the previous year.
60% of the cars financed were sport utility vehicles. Therefore, it is observed
that rising prices of vehicles are making people take loans or buy used
vehicles, even the used vehicles loan is more than the new vehicles loan which
is driving the automotive loan market in the United States.
Propelling Demand for
Pickup Truck Fueling the Market Growth
The demand for pickup
trucks is increasing due to the high-value proportion used for freight and
passenger transit. The pickup trucks have lifted axles, fitted wheels, and
alloy wheels to help them handle rocky, wet, and muddy terrain. They are
excellent for both off-road and on-road driving. For instance, according to
Experian Automotive, pickup truck makes up around 26.91% of all vehicles in
Texas. As a result, Texas has the most significant percentage of pickup trucks
in the country as the cost of a new pickup truck in the United States is high,
due to which people prefer loans over cash-down methods. For availing loan for
lorries, the distinction is made between commercial or personal use while the
financier is reviewing the application. Thus, considering advantages, customers
prefer pickup trucks over passenger cars, anticipating people to take a loan to
buy pickup trucks that offer them durability and different uses.
Expansion of Electric
Vehicles Boost the Market Growth
With the growing concern
for the environment, there is an increase in the use of electric vehicles in
the United States. Passenger cars, electric delivery vans, trucks, e-bikes,
etc., are available in the United States market. Thus, consumers are buying
electric vehicles due to their several benefits, but the price of electric cars
is much higher than gasoline-powered vehicles. So, most consumers are taking a
loan to buy electric cars. Additionally, consumers are offered certain federal
and state tax credits or incentives benefits while buying through the
automotive loan. For instance, various lenders are providing a ‘Green Auto
Loan,’ used to purchase eco-friendly vehicles by offering multiple discount
rates, extended repayment terms, and other benefits. Therefore, with the rise
in electric cars and the benefits of electric vehicle loans, the demand for
automotive loans is also growing in the United States.