Car loans rise 49% as premiumisation spreads beyond metros: TransUnion CIBIL

India’s shift towards higher-value cars is driving up vehicle loan sizes and extending repayment tenures, with premiumisation increasingly spreading beyond metropolitan centres to semi-urban and rural markets, according to a study by credit information company TransUnion CIBIL.

The study, Shifting Gears 2026 – Credit Drives Today’s Mobility, found that the average passenger vehicle loan amount rose 49% between the first half (H1) of 2019 and H1 2026 to ₹8.2 lakh. The average loan tenure increased by five months to 62 months over the same period, reflecting the growing role of financing in making higher-priced vehicles affordable.

The shift has been driven by consumer preference for SUVs and feature-rich vehicles, which has pushed up car prices. Notably, 51% of borrowers taking loans for higher-value cars (HVCs) in H1 2026 came from semi-urban and rural areas, an increase of six percentage points from 2019.

Non-banking financial companies (NBFCs) continued to dominate passenger vehicle financing, accounting for 37% of loans, compared with 26% for private banks. NBFCs increased their share by four percentage points between 2019 and 2026.

The active passenger vehicle borrower base reached 2.5 crore as of June 2026, 1.7 times the level recorded in June 2019. Portfolio quality also improved, with balance-level delinquency of more than 90 days past due declining by 95 basis points to 0.5%.

“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,” said Bhavesh Jain, MD & CEO, TransUnion CIBIL.

“Premiumisation is also extending beyond the larger cities, reflecting how ownership aspirations are changing across India. A first-time car buyer, someone moving up from a two-wheeler, a repeat buyer and a customer upgrading to a higher-value vehicle can have very different credit histories and financial profiles,” he said, adding credit information can bring greater clarity to these journeys and support more informed and responsible financing decisions.

The study also highlighted a changing profile of car buyers. Gen Z and younger Millennials were more prominent among first-time car buyers and consumers upgrading from two-wheelers to cars. Core and older Millennials, meanwhile, were more likely to be repeat buyers financing higher-value vehicles.

Two-wheeler credit base expands

The two-wheeler financing market is also witnessing a shift, with a growing proportion of borrowers having established credit histories. First-time borrowers accounted for 39% of two-wheeler loan originations in H1 2026, down 19 percentage points from 2019.

Conversely, 43% of borrowers had more than two years of credit history when taking out a loan, an increase of 16 percentage points since 2019. The changing mix points to a growing participation of credit-experienced consumers in the segment.

Outstanding two-wheeler loan balances reached ₹1.76 lakh crore as of June 2026, 3.2 times the June 2019 level. The active borrower base nearly doubled over the period, rising from 1.7 crore to 3.3 crore.

Portfolio quality improved as well, with delinquency of more than 90 days past due declining to 1.4% in June 2026 from 2.7% in June 2019, its lowest level since the latter date.

NBFCs continued to lead two-wheeler financing, accounting for 73% of loans, significantly higher than their 37% share of passenger vehicle financing.