Europe Used Car Financing Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023-2028)

The European Used Car Financing Market is expected to register a CAGR of 7.89% during the forecast period.

The market is driven by several factors. The key factor remains the cost affordability offered by used cars over new cars. As the region has the presence of higher income groups, the demand for used cars has been propelled by used luxury cars. People are inclined toward using luxury car financing to buy cars. Cars, including SUVs and luxury sedans, are the key hotspot of consumers while going ahead with used car financing.

COVID-19 has deeply affected the market on both sides of the table. During this period, people realized the economic crisis and its adverse effects on individual lives. This has created sudden challenges for several individuals who lost their respective jobs during the period. Moreover, in the post-COVID-19 period, people have been shifting their preferences toward saving money. Thus, there is more inclination toward owning vehicles with distributed EMI options to avoid one-time payments.

Furthermore, market growth has also witnessed challenges in terms of prices offered by different vendors, lack of standardization, servicing costs incurred by used vehicles, and routine maintenance. This has marginally reduced the demand for used vehicles over the years, which may act as a key restrain for the market. A few notable trends, including a shift toward online buying, technological advancements, and reduced rates for car insurance premiums, have also been observed to help the market recovery during the forecast period.

Europe Used Car Financing Market Trends

Online Purchase Has Gained Traction in Used Car Segment

Internet penetration has played the most crucial role in elevating the overall demand for used cars across Europe, which has ultimately elevated the demand for used car financing as well. The United Kingdom is among the leading countries with 83% smartphone penetration, followed by the Netherlands, Sweden, and Germany.

With the growing trend in technology, used car vehicle purchase through online sales has become the most preferred choice for customers over the past few years. Moreover, it provides additional facilities to monitor all the required documents, performance, and service records of the vehicle. This has proven much beneficial for consumers who can directly compare from a wide variety of choices and apply their desired filter to get the most relevant used car matching their choices.

Many new used car companies are entering the market and will continue to do so in the coming years. Companies are competing with the existing players by providing customized services, new fleets, and low-pricing strategies. Moreover, these online used car companies provide key fleets with options and filter to look through different OEMs, vehicle classes, and buying options. This has also helped consumers to check the respective buying options including financing rates, tenure, and down payment amounts for respective cars. For instance, in February 2022, Driverama announced the launch of online used car sales platform in Germany. The plan came when the company looked forward to expand its business potnetial in the German used car business. It announced that it will offer financing options as well for its available fleet.

Companies offering used cars in the market have partnered with financing companies in the region, including non-banking financial companies and banks, to offer better loan facilities for consumers. This has helped and contributed in boosting the market revenue.

Considering these factors, the demand for used car financing is expected to witness a significant growth during the forecast period.

United Kingdom to Lead the Front

The United Kingdom is among the largest automotive sector in Europe. The region is witnessing immense vehicle sales among both luxury and economic cars going to shift in consumer preferences towards owning luxury ones. Moreover, the region accommodates the used car landscape which is consistently witnessing immense growth over the years.

People are often seen opting for used car options to reduce the cost associated with a new car. They feel the advantages in taking ownership of a used car instead of a new one as it helps them to save more than 70% of their overall based on the car’s condition.

Furthermore, the region has topped in internet penetration among European countries. Growing digitization and start-up with new business, models are promoting the used car financing market. Digitization helps to store, retain and retrieve data. Almost all information is in digital format. This reduces the capital resources required and reduces the problem of storing documents. Thus, these factors have been identified to drive the market for used car financing in the region.

Furthermore, the market is marginally hit by rising electric vehicle sales in the country. Used car consumers have showcased a reduction in the sales of the used car amid the government’s mission of electric vehicle sales. This mitigated the consumer segment which resulted in the United Kingdom’s used car transactions has fallen by -12.2% in Q3 of 2022 with 1,785,447 vehicles changing hands. In addition, this has been the second consecutive quarter of a decline in used car purchases amid the new car supply shortages hit. This has thus been identified as a key restrain for financing business over the short term.

Moreover, over the longer term used car segment is anticipated to accommodate electric vehicles which might revolutionize the business potential of the used car market.

Europe Used Car Financing Market Competitor Analysis

The market for used car financing in Europe is moderately consolidated. The presence of limited organized and unorganized players has created such a market scenario. Also, most auto manufacturers, apart from offering their own financing, have tie-ups with banks and other financial institutions to offer a wider choice for their customers. But the relatively easier procedures to procure a loan from various NBFCs are expected to tilt the market in their favor. Players are offering better loan rates and discounts, thus creating a firm hold on the market.

Further, key banking companies have consistently regulated their partnerships with OEMs and companies offering used cars in the European marketplace.

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