India’s vehicle finance gains momentum led by used cars, commercial vehicles

New Delhi, Aug 19 (IANS) India’s vehicle finance market entered a phase of more segmented growth, led by commercial vehicle and used‑car lending, premiumisation in auto financing and rising penetration beyond major cities, a report said on Wednesday.

The report from CRIF High Mark identified commercial vehicle loans as the growth engine with a 20.1 per cent five‑year compound annual growth rate between June 2021 and June 2026.

Used‑car loans grew fastest at 26.2 per cent five‑year CAGR, with the borrower base for used cars expanding 2.4 times highlighting its growing formalisation and emergence as a mainstream credit segment.

Two‑wheeler financing remained the largest borrower segment, rising from around 2.3 crore in June 2021 to 3.6 crore in June 2026, and bringing new customers into the credit system.

Around 80 per cent of two‑wheeler related credit borrowers are new‑to‑product, the report noted.

Auto loans are showing signs of a premium-led recovery, with average exposure per borrower growing at a 9.2 per cent CAGR between June 2021 and June 2026. The share of auto loans above Rs 15 lakh increased from 27.6 per cent in Q1 FY25 to 29.8 per cent in Q1 FY27, pointing towards a shift towards higher-value vehicles.

Overall vehicle-finance originations grew 17.1 per cent YoY in Q1 FY27, supported by higher ticket sizes and continued volume growth across segments. Average auto-loan ticket size increased to Rs 8.6 lakh, while used-car financing continued to attract new borrowers, with 75 per cent of originations coming from new-to-product borrowers.

Vehicle-finance originations are also seeing increasing penetration across BT100 geographies, indicating growing demand beyond major urban centres. Two-wheeler loans recorded a 53 per cent BT100 share, while commercial vehicle loans stood at 45 per cent, highlighting the expanding reach of vehicle finance into smaller cities and markets.

“The overall risk environment is stabilizing, with later-stage delinquency improving across vehicle-finance segments,” the report said. Auto loans recorded the strongest asset quality, while commercial vehicle loans continued to experience comparatively higher early-stage delinquency.

Average ticket sizes are rising, active loans per borrower are increasing in some segments, and a growing multi‑loan borrower cohort among them suggests deeper lender relationships, the report noted.

—IANS

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