Introduction to Auto-Financing and its Current State
Auto-financing, a system where groups contribute money periodically to a common fund managed by a company for purchasing a vehicle, is experiencing growth in Mexico due to the slowdown in light vehicle sales and anticipated restrictions on auto loans. The Automotive Distributors Association of Mexico (AMDA) projects that auto-financing will increase its participation in auto acquisition financing schemes, including trucks, SUVs, and sedans.
Historical Context and Current Situation
According to Guillermo Rosales, President of AMDA, auto-financing has lost ground in financing, currently representing only 1%. In the 1990s, it held a 5% share. From January to May of the current year, auto-financing companies have secured 3,664 contracts, a stark contrast to 2005 when the sector issued over 25,000 contracts.
Auto-Financing vs. Traditional Bank Loans
Auto-financing differs from traditional bank loans, as it involves a group of individuals contributing to a common fund managed by a company for purchasing an automobile. This method of financing is distinct from conventional bank loans.
Future Prospects and Market Share
In an interview, Rosales stated, “In the coming months, we see opportunities for auto-financing as credit schemes become slightly more restrictive, reflecting a cooling economy.” He anticipates growth in this financing method.
Current Market Distribution of Auto Financing
As per AMDA’s report on financing, credit from automaker financiers accounts for 79% of vehicle sales in Mexico, followed by banks with 19.5%. Auto-financing constitutes a mere 1.28% of the market.
Key Questions and Answers
- What is auto-financing? Auto-financing is a system where groups contribute money periodically to a common fund managed by a company for purchasing a vehicle.
- Why is auto-financing gaining traction? Due to the slowdown in light vehicle sales and anticipated restrictions on auto loans, auto-financing is experiencing growth in Mexico.
- What was the historical share of auto-financing? In the 1990s, auto-financing held a 5% share of the auto financing market in Mexico.
- How many contracts have auto-financing companies secured so far in 2023? From January to May, auto-financing companies have secured 3,664 contracts.
- What percentage of the auto financing market does auto-financing currently hold? Auto-financing constitutes 1.28% of the auto financing market in Mexico, according to AMDA’s report.
