Auto Loans Market - Size, Share, Industry Trends, and Forecasts (2025-2032)

By Loan Provider:

Based on loan provider, the market is segmented into banks, non-banking financial companies (NBFCs), and credit unions.

Trends in the loan provider:

• Increasing technological advancements associated with automobile loans such as integration of artificial intelligence (AI), machine learning (ML) and others.
• Rising utilization of big data technologies to calculate and assess credit scores to identify auto loan defaulters.

Banks accounted for the largest revenue share of 48.72% in the year 2024.

• Traditional banks offer many loan products for the automobile industry with competitive interest rates and EMI options.
• Banks help customers avail automobile loans allowing them to buy various vehicles at a custom financing option and special discounts.
• For instance, Bank of America offers a rewards program to its members, which includes interest rate discounts for automobile loans for different tiers of members.
• Additionally, the increase in the speed of processing and approval of documents required to avail automobile loans has resulted in robust increase in the banks segment.
• Thus, according to the auto loans market analysis, the rising adoption of rewards program for members and increase in processing speed in automobile loans provided by banks are driving the automobile loans market trends.

Non-banking financial companies (NBFCs) is anticipated to register the fastest CAGR during the forecast period. 

• Non-Banking Financial Institutions (NBFCs) are institutions that provide financing options like automobile loans without being involved in banking services like traditional banks.
• Consumers are turning to NBFCs for lucrative interest rates, payment options, and 100% financing of automobiles which is driving the segment
• For instance, Mahindra Finance offers automobile loans for most major passenger and commercial vehicles at attractive interest rates with up to 100% funding of the car.
• Thus, as per the auto loans market analysis, the increase in NBFC financing has resulted in the rise in auto loans market.

By Loan Duration:

Based on loan duration, the market is segmented into short term and long term.

Trends in the loan duration:

• Rising shift towards use of short term loans due to lower rates and higher disposable incomes, especially in developing countries, allowing for the payment of high EMI.
• Factors including lower EMI and longer ownership of vehicles are driving the long term duration segment.

Long term loans accounted for the largest revenue share in the year 2024 and is anticipated to register the fastest CAGR during the forecast period.

• Long term automobile loans come with higher interest rates, but the EMI is spread throughout at a longer duration resulting in lower monthly payments.
• Consumers with lower disposable income often find the option of lower EMI lucrative even if it comes with higher interest rates due to the rising prices of cars and consumers wanting better and more expensive models of cars.
• For instance, according to a report by KBB, the average car buyer in the US spent close to USD 50000 as of December 2024 for a buying a new car, which was near an all-time high.
• Therefore, the long term auto loan segment has seen rising adoption due to lucrative EMIs during the forecast period.

By Vehicle:

Based on the vehicle, the market is segmented into passenger vehicles and commercial vehicles.

Trends in the vehicles:

• Increasing use of automobile loans in passenger vehicles for financing of SUVs and MUVs has driven the passenger vehicles segment.
• Factors including growing investments in trucks and tractors for transport and agriculture purposes have driven the commercial vehicles segment.

Passenger vehicles accounted for the largest revenue share in the year 2024.

• Passenger vehicles ownership has witnessed robust increase in recent times due to higher disposable incomes.
• Banks, NBFCs, and credit unions are increasingly focusing on passenger vehicles segment by offering different auto loan products to the end consumers, as per the auto loans market trends.
• Moreover, many car manufacturers have developed their own finance division offering various financial products, including automobile loans, to make it easier for the consumers to buy their cars.
• For instance, Toyota Financial Services, a division of Toyota offers many flexible loan options for Toyota and Lexus vehicles tailored to the customer’s requirement, making the purchase of the vehicles convenient.
• Therefore, the increasing use of automobile loans for passenger vehicles as a result of custom loan options is driving the auto loans market size.

Commercial vehicles is anticipated to register the fastest CAGR during the forecast period.

• Commercial vehicles refer to vehicles used for commercial purposes like transportation of goods or people. Trucks, buses, and tractors form the majority of the vehicles in the commercial vehicles segment.
• Many financial institutions today offer commercial vehicle loans to cater to the growing demand for trucks and buses. The loan products offered are tailored to the requirement of the end customer, vehicle type, and purpose.
• For instance, Chartway Credit Union, offers loan options to commercial vehicle buyers, often businesses, with various options and coverage like loans on vehicles that weigh up to 26000 lbs GVWR (Gross Vehicle Weight Rating).
• Thus, the rising number of commercial vehicles is driving the adoption of automobile loans, in turn, propelling the market during the forecast period.

By Ownership:

Based on the ownership, the market is segmented into new vehicles and used vehicles.

Trends in the ownership:

• Increasing adoption of automobile loans for used vehicles due to growing vehicle prices, better vehicles quality, and growth in online marketplaces.
• There is a rising utilization of financing cars new cars using automobile loans due to quick disbursement, resulting in auto loans market demand.

New vehicles accounted for the largest revenue share in the year 2024.

• This dominance is attributed to the rising number of auto loan options offered by banks and NBFCs to better address the needs of customers.
• Ownership of a new vehicle is often associated with high initial costs, making many consumers turn to automobile loans due to affordability.
• Moreover, options like 100% financing, life insurance coverage, and longer tenure loans have made automobile loans popular for new cars, as per the auto loans market trends.
• For instance, SBI offers 100% financing option for new cars, MUVs, SUVs based on the ‘On road price’ along with life insurance coverage and tenure of repayment of up to 7 years.
• Therefore, the increasing development of auto loan products for new vehicles has resulted in the auto loans market expansion.

Used vehicles is anticipated to register the fastest CAGR during the forecast period.

• Used cars have seen robust rise due to the emergence of online marketplaces connecting sellers with buyers.
• The increase in automobile loans for used vehicles can also be attributed to the fact that a new car’s value depreciates quickly, usually faster than a used car, right from the first year of purchase.
• For instance, according to Money Helper, depending on the car’s model, its value can depreciate from 15% to 35% within the first year and up to 50% in the next three years.
• Hence, the growing used cars segment is projected to increase the utilization of automobile loans during the forecast period.

By End User:

Based on the end user, the market is segmented into individuals and enterprises.

Trends in the end user:

• Increasing utilization of automobile loans by enterprises to manage finances and avail insurance to protect from business related risks and get automobile loans for different business requirements, is driving the auto loans market share.
• Enterprises in the transport and fleet management business have seen robust growth in the usage of automobile loans for purchase of new vehicles.

Individuals accounted for the largest revenue share in the year 2024.

• The rise in individual automobile loans can be attributed to better awareness of credit options to buy vehicles due to the internet.
• The use of internet-based tools and articles available on online marketplaces, banks, and NBFCs websites has made it easier for individuals to compare auto loan interest rates and down payment options of different loans by financial institutions and make an informed decision.
• For instance, My Auto Loan is an online platform that offers users the option to select the vehicle they want to buy, duration of the loan, and other basic information. The best loan offer is then presented to the user along with the lender’s information, allowing the user to compare different lender offerings.
• Thus, the rise in individual auto loan market has driven the overall auto loan market during the forecast period.

Enterprises accounted for the fastest growing revenue in the overall market in 2024.

• Enterprises are increasingly using automobile loans to finance their business needs in sectors like transportation.
• Many auto loan providers have started offering automobile loans for vehicles like tractors to agricultural businesses.
• Moreover, many construction or fleet businesses also avail automobile loans for construction vehicles and fleet vehicles, which is increasing the auto loans market share.
• For instance, Tata Motors Finance offers automobile loans for large, medium and small-sized fleet businesses that operate passenger and commercial vehicles like buses and trucks.
• Hence, as per the analysis, the growing demand for automobile loans by enterprises for fleets has resulted in the auto loans market expansion.