Connected and Automated Vehicles (CAVs) are one of the emerging technologies in the automotive domain that has the potential to alleviate the issues of accidents, traffic congestion, and pollutant emissions, leading to a safe, efficient, and sustainable transportation system. Machine learningbased methods are widely used in CAVs for crucial tasks like perception, motion planning, and motion control, where machine learning models in CAVs are solely trained using the local vehicle data, and the performance is not certain when exposed to new environments or unseen conditions. Federated learning (FL) is an effective solution for CAVs that enables a collaborative model development with multiple vehicles in a distributed learning framework. FL enables CAVs to learn from a wide range of driving environments and improve their overall performance while ensuring the privacy and security of local vehicle data. In this paper, we review the progress accomplished by researchers in applying FL to CAVs. A broader view of the various data modalities and algorithms that have been implemented on CAVs is provided. Specific applications of FL are reviewed in detail, and an analysis of the challenges and future scope of research are presented.