Eva Kellershof, Vice President of Sales for NETSOL Europe & North America, shares her insights on the shifting landscape of European auto finance in 2025.
With regulatory changes, consumer demands, and digital transformation driving the industry, stakeholders must prepare for both challenges and opportunities.
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As the European auto finance landscape approaches 2025, the industry is on the cusp of significant transformation. A combination of regulatory shifts, evolving consumer preferences, and technological advancements is driving change. Here are the key trends that will shape the market:
1. Regulatory changes and compliance
Commission disclosure requirements in the UK The UK Court of Appeal recently ruled undisclosed commission payments to car dealers unlawful. This decision could result in substantial compensation claims across the motor finance sector. In response, the Financial Conduct Authority (FCA) has extended the motor finance complaints process to include car leasing agreements, with lenders required to address these complaints by 4 December 2025.
EV regulation adjustments European OEMs, particularly in Germany, are grappling with stringent CO2 mandates. The economic outlook — highlighted by the European Central Bank’s decision to lower interest rates — suggests a potential shift in focus away from “green” initiatives. If CO2 penalties are suspended, it could temporarily ease financial pressures on manufacturers, but the long-term trajectory for electrification remains uncertain.
2. Growth of mobility finance and asset value maximisation
Subscription models on the rise Flexible vehicle access options are gaining traction among consumers. Subscription models, already popular in personal vehicle markets, are also being adopted in commercial sectors such as agriculture and logistics. Experts predict subscription models could account for 20% of the total asset-financing market by 2025.
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By GlobalDataExpansion of used-car financing The used-car financing and leasing sector is poised for rapid growth, with a projected compound annual growth rate (CAGR) of 15% from 2023 to 2030. This trend reflects shifting consumer interest towards cost-effective options amidst economic uncertainty.
3. Technological push into digital transformation
Omni-channel retailing and origination Digital platforms are revolutionising auto finance operations. From streamlining loan applications to enhancing customer experiences, automation and artificial intelligence (AI) are reshaping processes across the board. These advancements are also supporting the reinvention of traditional dealership models.
4. Challenges and opportunities in EV financing
Leasing obstacles European leasing firms face difficulties with electric vehicles (EVs), particularly due to low resale values that inflate lease prices. Some companies have signalled they may exit the market if regulators accelerate electrification mandates.
Affordable EVs on the horizon Smaller, cost-effective EVs from Chinese OEMs and other global manufacturers are entering the market. These vehicles could boost EV adoption by addressing affordability concerns and expanding consumer access.
5. Captives’ role in financing and leasing
Volkswagen Financial Services’ sale of its US financing business to Wells Fargo raises questions about the future role of captive finance arms. Could this signal a broader trend of OEMs integrating leasing with sales to better support EV adoption? This is a key development to watch in 2025.
These trends indicate a dynamic shift in the European auto finance sector, with stakeholders needing to adapt to regulatory developments, technological advancements, and changing consumer behaviours to remain competitive in 2025 and beyond.
