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Auto Asset Backed Security (ABS) Market Trends That Will Shape the Next Decade: Insights from Pioneering Sustainable Financing Through Green Auto Loan Securities
Auto Asset Backed Security ABS Market Size
How Large Will the Auto Asset Backed Security (ABS) Market Size By 2025?
The automobile asset-backed security (ABS) market has witnessed impressive expansion in recent times. It's predicted to surge from $258.72 billion in 2024 to $282.45 billion in 2025, registering a compound annual growth rate (CAGR) of 9.2%. Factors such as a surge in auto loan initiations, escalating growth in used car finance, improved securitization schemas, the need for financing alternatives, and an uptick in vehicle sales are attributable to the growth seen in the past period.
How Big Is the Auto Asset Backed Security (ABS) Market Size Expected to Grow by 2029?
Anticipated robust growth in the automobile asset-backed securities (ABS) market is expected in the coming years, expanding to $396.18 billion in 2029, with an 8.8% compound annual growth rate (CAGR). The surge during this projected period is likely due to the escalation in vehicle costs, volatility in interest rates, tightening of monetary policies, ongoing digitalization, growth in requirements for loans and leases, and a rise in the need for auto finance. Key trends foreseen during this period include technological progress, broadening of auto loans, advancements in ultrasound technology, innovative vehicle finance products, and the widening of subprime lending.
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Which Key Market Drivers Powering Auto Asset Backed Security (ABS) Market Expansion and Growth?
The escalating demand for vehicle finance is anticipated to fuel the auto asset-backed security (ABS) market's expansion in the future. Vehicle finance pertains to securing a loan or credit arrangement to procure a vehicle, mainly through loans or lease contracts from banks, car finance companies, or dealers. The rising cost of vehicles, growing consumer desire for private transportation, and availability of flexible loan arrangements with low-interest rates are causing a surge in the need for vehicle finance. This heightened demand has led to a boom in auto loans, which are usually collected together and transformed into auto asset-backed securities (ABS) to offer liquidity and distribute risk for lenders. For example, in March 2022, the Motorsport Network, a technology firm based in the US reported that in January, 54,000 new privately owned cars had been financed, showing a 47% increase in comparison to 2021. As such, the escalating demand for vehicle finance is catalyzing the growth of the auto asset-backed security (ABS) market. Increase In Adoption Of Electric Vehicles Is Boosting The Market Growth Due To Growing Requirement For EV Financing Solutions
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Which Fast-Growing Trends Are Poised to Disrupt the Auto Asset Backed Security (ABS) Market?
Leading firms in the auto asset-backed security (ABS) market are honing their focus on crafting innovative strategies such as sustainable finance solutions. These are built to promote responsible capital utilization for resilience in the future. Such financial services and tools prioritize economic activities in ways that incorporate environmental, social, and governance (ESG) elements. The ultimate aim of this is fostering sustainable growth that is conscientially executed in the long-term. An instance of this being put into practice happened in July 2024 when Mercedes-Benz Auto Finance Ltd, a Chinese company renowned for its customizable auto finance services, announced its inaugural Green Auto Loan Asset-Backed Security (ABS) in the Chinese Interbank Bond Market. The Class A Notes, with a value of $116.36 million, carry an average lifespan of 1.42 years and a coupon rate of 1.87%. This milestone stands as Mercedes-Benz's first-ever Green ABS globally. It also marks the inaugural introduction of a Green Asset-Backed Security by an overseas automotive firm in China. Proceeds garnered will be allocated towards creating new auto loan agreements specifically for battery electric vehicles.
What Are the Emerging Segments in the Auto Asset Backed Security (ABS) Market?
The auto asset backed security (abs) market covered in this report is segmented -
1) By Type: Auto Loan Asset-Backed Security, Auto Finance Leasing Asset-Backed Security, Auto Operating Lease Asset-Backed Security, Other Receivables Asset-Backed Security
2) By Securitization Structure: Traditional Asset-Backed Security, Structured Asset-Backed Security
3) By Application: Automobile Manufacturers, Commercial Banks, Investment Banks, Trust Plans
4) By End User: Pension Funds, Insurance Companies, Hedge Funds, Asset Management Firms, Non-Banking Financial Companies (NBFCs)
Subsegments:
1) By Auto Loan Asset-Backed Security: Prime Auto Loan ABS, Subprime Auto Loan ABS, Near-Prime Auto Loan ABS, New Vehicle Loan ABS, Used Vehicle Loan ABS, Fixed Rate Auto Loan ABS, Floating Rate Auto Loan ABS, Captive Finance Auto Loan ABS, Non-Captive Lender Auto Loan ABS, Dealer Floorplan Loan ABS
2) By Auto Finance Leasing Asset-Backed Security: New Car Finance Lease ABS, Used Car Finance Lease ABS, Closed-End Lease ABS, Open-End Lease ABS, Manufacturer-Sponsored Lease ABS, Independent Lessor Lease ABS, Captive Finance Lease ABS, Balloon Payment Lease ABS, High Residual Risk Lease ABS, Subprime Auto Lease ABS
3) By Auto Operating Lease Asset-Backed Security: Fleet Vehicle Lease ABS, Commercial Auto Lease ABS, Short-Term Operating Lease ABS, Subscription-Based Mobility ABS, EV Operating Lease ABS, Ride-Share Vehicle Lease ABS, OEM-Backed Operating Lease ABS, Residual Value Insurance-Backed Lease ABS, Used Vehicle Operating Lease ABS, Vehicle-as-a-Service (VaaS) ABS
4) By Other Receivables Asset-Backed Security: Auto Repair Finance Receivables ABS, Extended Vehicle Warranty ABS, GAP Insurance Receivables ABS, Vehicle Service Contract ABS, Auto Title Loan Receivables ABS, Auto Parts Financing ABS, Dealer Services Fee Receivables ABS, Roadside Assistance Membership ABS, Buy-Here Pay-Here Receivables ABS, Telematics/Usage-Based Insurance Receivables ABS
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Who Are the Global Leaders in the Auto Asset Backed Security (ABS) Market?
Major companies operating in the auto asset backed security (abs) market are BMW Group, Citigroup Inc., Tesla Inc., BNP Paribas SA, Porsche Financial Services Inc., Mizuho Bank Ltd., Carvana Co., General Motors Financial Company Inc., Guangzhou Xiaopeng Motors Technology Co. Ltd., Credit Acceptance Corporation, Ford Motor Credit Company LLC, Paa Technologies Ltd., Toyota Motor Credit Corporation, American Honda Finance Corporation, Dongfeng Motor Company Limited, Westlake Corporation, Stellantis Financial Services, Diamond Hill Capital Management Inc., Ping An Bank Ltd., Mercedes-Benz Auto Finance Ltd.
Which are the Top Profitable Regional Markets for the Auto Asset Backed Security (ABS) Industry?
North America was the largest region in the auto asset backed security (ABS) market in 2024. Asia-Pacific is expected to be the fastest-growing region in the forecast period. The regions covered in the auto asset backed security (abs) market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, Africa.
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