New Delhi: India’s growing preference for premium cars, particularly SUVs and feature-rich vehicles, is reshaping the automotive financing market. The average passenger vehicle loan amount has increased by 49% to ₹8.2 lakh in the first half of 2026, compared with the corresponding period in 2019, according to a new report by credit information company TransUnion CIBIL.
The report, titled Shifting Gears 2026 – Credit Drives Today’s Mobility, reveals that Indian consumers are borrowing larger amounts and opting for longer repayment periods to finance their vehicle purchases. The average passenger vehicle loan tenure has increased by five months to 62 months, highlighting the growing importance of financing in car ownership.
The findings also indicate that demand for higher-value vehicles is spreading beyond metropolitan markets, while two-wheeler financing is increasingly attracting borrowers with established credit histories.
Car Buyers Borrowing More as Premiumisation Accelerates
The shift towards SUVs and vehicles equipped with more advanced features has contributed to higher purchase prices, prompting consumers to rely on larger loans.
Between H1 2019 and H1 2026, the average passenger vehicle loan grew by 49% to ₹8.2 lakh. Meanwhile, the average repayment period increased to 62 months, equivalent to five years and two months.
Longer repayment periods can help reduce monthly instalments, although they may also increase the total interest paid over the life of a loan.
The passenger vehicle financing market has expanded considerably during this period. India’s active passenger vehicle borrower base reached 2.5 crore in June 2026, approximately 1.7 times the level recorded in June 2019.
Despite larger loans, portfolio performance has improved. The proportion of outstanding passenger vehicle loan balances overdue by 90 days or more declined by 95 basis points to 0.5%.
Non-banking financial companies (NBFCs) remained the largest lenders in passenger vehicle financing, accounting for 37% of loans in H1 2026. Private sector banks followed with a 26% share. The report noted a four-percentage-point increase in NBFCs’ passenger vehicle lending share between 2019 and 2026.
Premium Car Demand Expands Beyond India’s Metropolitan Cities
One of the report’s notable findings is the growing participation of consumers from semi-urban and rural India in the higher-value car financing market.
In H1 2026, 51% of borrowers taking another higher-value car loan were from semi-urban and rural regions, an increase of six percentage points compared with 2019.
The trend suggests that demand for more expensive vehicles is no longer concentrated primarily in India’s largest urban centres.
The transition from two-wheelers to passenger vehicles is also gaining momentum in smaller markets.
According to TransUnion CIBIL, rural car loan originations among consumers upgrading from two-wheelers grew at a compound annual growth rate (CAGR) of 15% since 2019, nearly twice the 8% CAGR recorded for overall auto-loan originations.
The report also highlights generational differences in vehicle ownership. Gen Z and younger Millennials feature more prominently among first-time car buyers and consumers transitioning from two-wheelers, while core and older Millennials are more represented among repeat buyers and those financing higher-value vehicles.
Bhavesh Jain, MD & CEO, TransUnion CIBIL, said, “Car ownership is increasingly being shaped by a combination of aspiration and affordability. Consumers are choosing higher-value and feature-rich vehicles, while larger loan amounts and longer tenures are helping make these purchases more manageable.”
He also observed that different categories of car buyers have distinct financial profiles, making credit information important for responsible lending decisions.
Two-Wheeler Loans Move Beyond First-Time Credit Borrowers
While passenger vehicle financing reflects changing consumer aspirations, India’s two-wheeler credit market is undergoing a different transformation.
Traditionally regarded as an entry point into formal borrowing, two-wheeler financing is increasingly being used by consumers who already have established credit histories.
First-time credit borrowers accounted for 39% of two-wheeler loan originations in H1 2026, representing a decline of 19 percentage points from 2019.
At the same time, the share of two-wheeler borrowers with more than two years of credit history increased from 27% in 2019 to 43% in 2026.
This changing composition indicates that two-wheeler loans are becoming a more established component of consumers’ financial activities rather than simply their introduction to formal credit.
The market has also expanded significantly.
Outstanding two-wheeler loan balances reached ₹1.76 lakh crore in June 2026, approximately 3.2 times the June 2019 figure.
The active borrower base nearly doubled, increasing from 1.7 crore in June 2019 to 3.3 crore in June 2026.
Loan repayment performance improved alongside this expansion. The share of outstanding balances overdue by 90 days or more fell to 1.4%, compared with 2.7% in June 2019.
NBFCs continued to dominate two-wheeler financing, accounting for 73% of loans.
Young and Rural Consumers Remain Central to Two-Wheeler Financing
Two-wheeler loans continue to play an important role in meeting the mobility needs of younger consumers and those living outside major cities.
In H1 2026, approximately 64% of two-wheeler loan borrowers came from semi-urban and rural regions, while 43% were aged 30 years or younger.
The report also found that borrowers increasingly maintain relationships with multiple credit products.
Around 32% of two-wheeler loan consumers held consumption-led credit products, including personal loans, consumer durable loans and credit cards, compared with 22% in H1 2019.
The findings suggest that purchasing a two-wheeler often forms part of a longer financial journey.
Among consumers who originated a two-wheeler loan in the second half of 2022, 68% obtained another credit product within the following three years.
That proportion reached 84% among consumers taking their first two-wheeler loan who already had at least two years of credit history.
In many cases, subsequent borrowing extended into personal loans, credit cards, automobile loans and housing loans within 12 to 18 months.
Commenting on the evolving market, Jain said, “Two-wheelers are closely linked with how young India studies, works and earns. For a student travelling to college, a young professional commuting to work, or someone earning through the gig economy or pursuing an entrepreneurial opportunity, personal mobility can open up a much wider set of possibilities.”
He added that two-wheeler financing is increasingly becoming part of a longer customer relationship extending beyond the initial vehicle purchase.
What the Changing Loan Market Means for India’s Auto Industry
The findings highlight two distinct developments in India’s vehicle financing landscape.
In the passenger vehicle segment, higher vehicle prices and demand for premium features are encouraging consumers to borrow more and extend repayment periods.
In the two-wheeler segment, financing continues to support mobility among younger and non-metropolitan consumers while becoming more widely used by borrowers with established credit records.
Improving delinquency figures across both segments also suggest stronger loan repayment performance than in 2019, despite the expansion in outstanding credit.
However, larger loans and longer repayment periods place greater importance on affordability assessments, borrowing costs and responsible lending practices.
For automakers, the growing participation of consumers from semi-urban and rural markets could influence product positioning, dealership expansion and financing partnerships.
Ultimately, the TransUnion CIBIL report illustrates how India’s vehicle ownership ambitions are evolving alongside its credit market. From young consumers financing their first two-wheeler to established borrowers upgrading to more expensive cars, formal credit is playing an increasingly significant role in personal mobility. The next challenge will be ensuring that rising aspirations remain matched by sustainable borrowing and repayment capacity.
