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Car finance covers a range of financial products that give customers funds to buy a car without paying the total amount in cash or lump sums. These services are offered by finance companies and specialized car manufacturers. There are various financial products in the car loan category. Due to the growing digitalization trend, increased use of online platforms, and better telecommunication, the number of car loan customers is rising. Market growth is also driven by new business models and the development of innovative strategies. The demand is driven by the increase in the global average price of vehicles. A decline in interest rates on car loans often encourages business growth. However, the market is constrained by the increasing indebtedness of various borrowers. To this end, let’s explore some of the current trends. 

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The leasing segment will drive the market

The number of car leasing providers is increasing in emerging markets. Moreover, millennials see leasing as an effective way to own a vehicle without buying it. Vehicle leasing is considered a new business segment offering immense growth opportunities. For several reasons, there has been a pouncing on these second-hand models in France. The semiconductor crisis: due to the shortage of electronic crisps, many factories had to cut back on production, which inevitably affected the production of new cars. Toyota and Stellantis have been affected. Prices for vehicles less than two years old have increased by 25%. Carventura (a reseller auto company based in Paris, France) reports an increase of 19.3 % (city cars) and 8.7 % (SUVs) in one year on vehicles registered for the first time in 2020.

Easy availability of credit

Non-bank financial companies offer car finance with less stringent lending criteria and flexible repayment terms, enticing consumers to car ownership. Credit availability, usually through a bank or other financial institution, allows consumers to pay the dealer or manufacturer. Even if they do not have the money, they can own the car without paying the total amount.

Fraud rise 

Auto loan fraud rose 5% year on year. It represents 7.7 billion dollars in 2021 in the U.S.A. market. Also, stimulus funds dried up, and employment fraud, income forgery, and the use of synthetic identities increased in the European market. There are fewer attacks compared to the American market. But according to market predictions, it still stands for €1 billion in losses for the car industry. The graph below shows the automotive fraud cases in France found by Bleckwen’s scoring model. It highlights Parisian and Marseille as risk regions in the automotive segment.

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It is difficult for companies to keep up with risks and avoid fraud in the ever-changing landscape. For this, the need to invest in quick and effective solutions. The Renault-Nissan Alliance, one of Europe's largest car retailers, started using Bleckwen to detect and prevent fraud. Thanks to the collaborative process, the transition was smooth and successful.

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• Nearly 59 % of the files reported turned out to be fraudulent;
• We prevented fraud amounting to €1.5 million per year;
• The company has been able to distribute its resources on more consistent projects.

Optimization of processes, performance gain, better results, competitive advantage, learn more about the benefits of AI (Artificial Intelligence) solutions for fraud detection here.

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References

• Fraud exposure in auto lending exceeds $7.7B in 2021 - Auto Finance News 
• Fighting Auto Lending Fraud with Prove Pre-fill™ - Prove 
• Bleckwen, a tool to alert fraud : a successful test at DIAC - RCI Bank and Services

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