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India's Vehicle Loans Surge: Used Cars Lead Growth
22 Aug
Summary
- Commercial vehicle loans grew 20.1% over five years.
- Used car loans are the fastest-growing segment.
- Delinquency indicators are improving across most categories.
India's vehicle finance market is experiencing robust growth, with commercial vehicle loans projected to expand at a 20.1% compound annual growth rate (CAGR) between June 2021 and June 2026. This expansion is driven by a diversification within the sector, marked by segmented growth across various vehicle types.
The used car loan category stands out as the fastest-growing segment, exhibiting a 26.2% CAGR over the same five-year period. This surge indicates a significant formalization of credit access, transforming used car financing into a mainstream product.
Two-wheeler financing continues to hold the largest borrower volume, consistently introducing new customers to credit, with 80% of its borrowers being new to this product. Auto loan disbursements are notably shifting towards higher values, with average ticket sizes increasing at a 9.2% CAGR.
Asset quality indicators are improving, with delinquency rates showing a downward trend across most vehicle loan categories. While auto loans maintain the lowest risk profile, commercial vehicle loans present a slightly higher early-stage delinquency. However, overall vehicle loan originations saw a 17.1% year-on-year rise in Q1 FY27.
