Philippines Auto Finance Market Surges with 7.31% CAGR: A Record 430,000 Vehicles Sold in 2023

The Philippines Auto Finance Market is undergoing a transformative phase, marked by rapid growth, technological advancements, and evolving consumer behavior. Whether you're exploring options for car ownership or intrigued by the inner workings of the auto finance market in the Philippines, this dynamic sector offers insights into how Filipinos finance their vehicles amidst a changing economic landscape.

Philippines Auto Finance Market Growth and Trends: A Promising Trajectory

According to Makreo Research, the Philippines Auto Finance Market has grown, registering an impressive compound annual growth rate (CAGR) of 7.31% from 2019 to 2023. Despite inflationary pressures and rising interest rates, 2023 saw record-breaking sales with approximately 430,000 vehicles sold—an undeniable sign of the market’s resilience.

How the TRAIN Law Reshaped the Auto Finance Market

The implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law in 2018 brought about significant changes in the Philippines Auto Finance Market. The law led to higher excise taxes on vehicles, especially luxury models, causing a shift in consumer behavior. More consumers turned to competitive financing options and longer loan tenures to cope with the increased costs.

Despite these higher taxes, the demand for auto loans remains robust. According to Makreo Research, Filipinos continue to adjust their financial strategies, highlighting the strong desire for car ownership, even in the face of economic challenges.

Key Players in the Philippines Auto Finance Market

In the auto finance market in the Philippines, banks are the dominant players, offering a wide range of loan products tailored to various consumer needs. Notable banks include:

• BDO Unibank (BDO): As the largest bank in the Philippines, BDO offers flexible payment terms and competitive interest rates.
• Bank of the Philippine Islands (BPI): Known for fast approvals and minimal requirements, BPI is a trusted name in auto loans.
• Metrobank: Offering tailored solutions, Metrobank covers both new and used vehicles, addressing diverse consumer preferences.

Consumers prefer banks due to their reputation, convenience, and the overall lower cost of loans. However, captive financing options, such as Toyota Financial Services, offer lower initial down payments and a seamless experience for buyers directly linked to manufacturers.

Recent Developments in the Philippines Auto Finance Market

The Philippines auto finance industry has seen several notable milestones in recent years, further driving growth and innovation:

• RCBC Auto Loan FlexiLite Launch (September 2024): RCBC’s innovative no-downpayment and lower monthly payment product is gaining traction, offering consumers more flexibility.
• Creador’s Investment in Asialink Finance Corporation (February 2024): This PHP 4 billion investment highlights the increasing interest in the auto finance sector.
• Toyota Financial Services' Record Earnings: Toyota Financial Services reported a remarkable 72.9% increase in net income in 2023, demonstrating the growing profitability of auto financing.

Challenges and the Rise of Digital Auto Financing

While the Philippines Auto Finance Market is booming, securing a car loan can still be challenging for retail customers and small businesses. Strict lending criteria often pose hurdles for many Filipinos. However, the rise of digital financial technologies is transforming the industry, making it easier to obtain auto loans.

Fintech companies are breaking down traditional barriers, offering innovative solutions that cater to the underbanked population. As digital finance continues to evolve, it’s becoming faster, more efficient, and more accessible to a wider range of consumers. Makreo Research notes that these technological advancements are opening new opportunities in the auto finance market in the Philippines, providing greater financial inclusion for Filipinos.

Motorcycles vs. Cars: A Surprising Rivalry

In 2023, motorcycle sales in the Philippines hit an impressive 1.5 million units, significantly outpacing car sales. Motorcycles are more affordable and practical for navigating traffic in congested urban areas. However, when it comes to auto financing, cars dominate. Motor vehicles, including passenger and commercial vehicles, comprise over 90% of the Philippines Auto Finance Market.

Future Outlook: What’s Next for the Philippines Auto Finance Market?

The future of the auto finance market in the Philippines is exceptionally bright. By 2025, motor vehicle sales are expected to reach 1 million units, driven by the country’s rapid population growth and rising income levels. The adoption of digital technologies, including AI and machine learning, will continue to streamline the auto loan process, making it faster and more personalized.

As the government continues to invest in infrastructure, including electric vehicle charging stations, the market for eco-friendly vehicles is set to expand. Makreo Research predicts that with a growing, tech-savvy population, the demand for innovative financial services in the auto industry will accelerate, creating significant opportunities for both traditional lenders and fintech players.

According to Makreo Research, the Philippines Auto Finance Market is positioned for substantial growth in the coming years. From economic recovery and government initiatives to technological advancements, the market is evolving rapidly. For stakeholders and industry experts looking to navigate this dynamic landscape, Makreo Research’s report, “Philippines Auto Finance Market Size and Forecast (2019-2029),” offers comprehensive insights into current trends, major players, and future opportunities.

Market Segmentation

By Type of Vehicle Financed

• Motor Vehicle

• 2Wheeler

By Lender Type

• Banks

• NBFCs

• Captives

By Type of Loan

• New Car

• Used Car

• Refinancing

By Loan Tenure

By Geographical Locations

Companies Covered

• Toyota Financial Services Philippines Corporation (TFSPH)

• AsiaLink Finance Corporation

• Metro Bank Philippines

• Philippines Savings (PS) Bank

• Asia United Bank

• Union Bank of the Philippines (UBP)

• Bank of Philippines Island (BPI)

• BDO Unibank Philippines

• Robinsons Bank

• Philippines National Bank (PNB Savings Bank)

• Security Bank

• East West Bank