India’s average passenger vehicle loan amount increased 49% to ₹8.2 lakh between the first half of 2019 and the first half of 2026, while the average repayment tenure extended by five months to 62 months. The findings, published by TransUnion CIBIL in its Shifting Gears 2026 – Credit Drives Today’s Mobility report, point to a shift towards higher-value car purchases and greater reliance on financing to make vehicle ownership affordable.
The report, which examines personal vehicle financing between H1 2019 and H1 2026, also highlights the growing role of semi-urban and rural borrowers, the expansion of non-banking financial companies (NBFCs) in vehicle lending and the changing credit profiles of two-wheeler buyers. While larger loans and longer tenures can help households spread the cost of a vehicle, they also increase the importance of evaluating total interest payments and repayment capacity.
Key takeaways
- Average car loan: ₹8.2 lakh in H1 2026, up 49% from H1 2019.
- Repayment tenure: Increased by five months to an average of 62 months.
- Rural and semi-urban demand: These areas accounted for 51% of borrowers taking higher-value car loans in H1 2026.
- Active passenger vehicle borrowers: Reached 2.5 crore as of June 2026, 1.7 times the June 2019 level.
- NBFC market share: NBFCs accounted for 37% of passenger vehicle loans, ahead of private banks at 26%.
- Loan portfolio quality: Passenger vehicle loan delinquency of 90 days or more fell to 0.5%, down 95 basis points over the seven-year period.
- Two-wheeler finance: Outstanding balances reached ₹1.76 lakh crore as of June 2026, 3.2 times the June 2019 level.
Car Loan Amounts in India Rise as Vehicle Purchases Become More Expensive
The increase in average car loan amounts reflects a combination of higher vehicle prices, changing consumer preferences and the wider availability of financing.
Indian buyers have increasingly shown interest in sport utility vehicles (SUVs), feature-rich models and higher-priced variants. As the price of the vehicle rises, buyers who finance their purchases generally need to borrow more unless they increase their down payment.
The increase from the first half of 2019 to the first half of 2026 also reflects changes in the composition of borrowers and the vehicles they purchase. The 49% rise in average loan size does not necessarily mean that every borrower is taking on 49% more debt. It is an aggregate measure that can be affected by vehicle prices, loan-to-value ratios and the mix of vehicles being financed.
For households, vehicle financing offers a way to purchase a car without paying the entire price upfront. Instead, the borrower makes an initial down payment and repays the lender through monthly instalments over an agreed period.
However, borrowing more can increase the overall financial commitment. The amount borrowed, the interest rate, the repayment period and any applicable fees determine how much a buyer ultimately pays.
Key figures from the TransUnion CIBIL report
| Indicator | H1 2019 / June 2019 | H1 2026 / June 2026 |
|---|---|---|
| Average passenger vehicle loan | Baseline | ₹8.2 lakh |
| Growth in average passenger vehicle loan | — | 49% |
| Average loan tenure | 57 months | 62 months |
| Active passenger vehicle borrower base | Approximately 1.47 crore | 2.5 crore |
| Passenger vehicle loan market share of NBFCs | 33% | 37% |
| Passenger vehicle delinquency of 90+ days | 1.45% | 0.5% |
Note: The report provides the seven-year growth rates and end-period figures. The June 2019 active borrower base and delinquency figures above are approximate calculations based on the reported growth and decline.
Why Are Car Loan Repayment Tenures Getting Longer?
The average passenger vehicle loan tenure increased by five months to 62 months between H1 2019 and H1 2026.
A longer tenure spreads repayment over more months, reducing the monthly instalment for a given loan amount and interest rate. This can help a buyer afford a more expensive vehicle without facing an equally large increase in monthly payments.
For example, a buyer financing ₹8 lakh at an illustrative annual interest rate of 9.5% would pay approximately ₹16,000 per month on a five-year loan. Extending the tenure to six years would bring the monthly instalment down to around ₹14,600.
However, the lower EMI comes with a trade-off. The borrower pays interest over a longer period, increasing the total borrowing cost if the interest rate and other terms remain unchanged.
| Illustrative loan calculation | Five-year loan | Six-year loan |
|---|---|---|
| Loan principal | ₹8 lakh | ₹8 lakh |
| Annual interest rate | 9.5% | 9.5% |
| Monthly EMI | Approximately ₹16,800 | Approximately ₹14,600 |
| Total repayment | Approximately ₹10.08 lakh | Approximately ₹10.51 lakh |
| Total interest | Approximately ₹2.08 lakh | Approximately ₹2.51 lakh |
Illustration only. Actual EMIs and total interest depend on the lender’s rate, repayment schedule, fees and loan terms. Figures are rounded.
The illustration shows why buyers should not assess affordability solely by looking at the monthly EMI. The six-year loan reduces the monthly payment by roughly ₹2,200, but increases the total interest cost by about ₹43,000.
Longer tenures can make sense for households that need more flexibility in their monthly budgets. But borrowers should compare multiple repayment periods and consider the total cost of financing before committing.
Higher-Value Cars Are No Longer Limited to Major Cities
The report highlights the growing importance of semi-urban and rural India in the market for higher-value vehicles.
TransUnion CIBIL found that 51% of borrowers taking higher-value car loans in H1 2026 came from semi-urban and rural areas, up six percentage points from 2019.
This indicates that demand for more expensive vehicles is spreading beyond India’s largest metropolitan markets. Greater access to formal credit, aspirations for vehicle upgrades and the availability of more vehicle models could all contribute to this expansion.
The report also found that originations among rural borrowers moving from two-wheelers to cars grew at a compound annual growth rate of 15% since 2019, compared with 8% for overall auto-loan originations.
A compound annual growth rate (CAGR) measures the average annual growth rate over a period, assuming a compounded progression. It does not mean the market grew at exactly the same rate in every year.
The findings suggest that vehicle ownership journeys are becoming more varied. Some consumers are buying their first cars, others are moving up from motorcycles or scooters, and existing car owners are upgrading to more expensive vehicles.
For lenders, these differences matter because borrowers have different credit histories, incomes and repayment patterns. Credit information can help lenders assess these profiles and make more informed lending decisions.
NBFCs Continue to Lead Passenger Vehicle Financing
Non-banking financial companies remain significant participants in India’s vehicle financing market.
According to the report, NBFCs accounted for 37% of passenger vehicle loans in 2026, compared with 26% for private banks. NBFCs increased their share by four percentage points between 2019 and 2026.
NBFCs are financial institutions that provide lending and other financial services but do not operate as full-service commercial banks. They can serve customers through vehicle dealerships, specialised lending operations and distribution networks designed around particular borrower segments.
Their presence can be particularly important in markets where customers need flexible financing options or where lenders must assess borrowers with different credit histories.
Private banks remain important competitors, while public sector banks and other financing providers also participate in vehicle lending.
Competition between these institutions can influence loan pricing, approval processes and the range of repayment options available to customers. However, the best financing option for an individual borrower depends on the interest rate, fees, loan conditions and overall repayment capacity rather than the lender’s category alone.
Passenger Vehicle Credit Quality Improves
Despite the increase in average loan sizes and longer repayment periods, the report indicates an improvement in passenger vehicle loan portfolio quality.
The balance-level delinquency rate for passenger vehicle loans that were at least 90 days overdue declined by 95 basis points to 0.5% between June 2019 and June 2026.
A basis point is one-hundredth of a percentage point. A decline of 95 basis points is therefore equivalent to a fall of 0.95 percentage points.
The reported improvement suggests that a smaller share of outstanding passenger vehicle loan balances had fallen at least 90 days overdue by June 2026.
However, delinquency is a measure of repayment performance, not a complete measure of credit risk. It does not guarantee that future defaults will remain low, especially if economic conditions deteriorate or household borrowing costs rise.
The figures also describe the loan portfolio as a whole. Individual borrowers can face different repayment risks depending on income stability, existing debts, interest rates and unexpected expenses.
For lenders, maintaining credit quality while expanding lending will require appropriate underwriting, reliable income assessment and ongoing monitoring of repayment behaviour.
Two-Wheeler Loans Are Becoming a Mainstream Credit Product
The report also identifies significant changes in two-wheeler financing.
Outstanding two-wheeler loan balances reached ₹1.76 lakh crore as of June 2026, 3.2 times the level recorded in June 2019. The active borrower base increased from 1.7 crore to 3.3 crore over the same period.
Two-wheeler loans have traditionally served as an entry point into formal credit for many consumers, particularly younger borrowers purchasing motorcycles or scooters for education, work and daily travel.
The report found that first-time borrowers accounted for 39% of two-wheeler loan originations in H1 2026, down 19 percentage points from 2019. Meanwhile, 43% of borrowers had more than two years of credit history when they took out their loans, compared with 27% in 2019.
This changing composition suggests that two-wheeler financing is increasingly serving customers who already have established credit relationships, rather than primarily acting as a first step into borrowing.
The trend also reflects the role of personal mobility in employment and economic activity. Motorcycles and scooters can help people travel to workplaces, educational institutions and customers, while also supporting gig work and small businesses.
The report found that 68% of consumers who originated a two-wheeler loan in H2 2022 went on to originate another credit product within the following three years. The share rose to 84% among first-time two-wheeler borrowers who already had at least two years of credit history.
These figures highlight how vehicle financing can form part of a broader relationship between consumers and formal lenders.
What Rising Vehicle Loans Mean for Consumers
The expansion of vehicle financing gives consumers greater flexibility in purchasing cars and two-wheelers. It can also support vehicle sales by allowing buyers to spread payments over time.
But greater access to credit makes financial planning more important.
A car loan EMI is only one part of vehicle ownership costs. Buyers also need to account for fuel, insurance, maintenance, repairs, parking and registration-related expenses. These costs can rise as a vehicle ages, even while the loan remains outstanding.
Borrowers should also consider how stable their income is likely to be over the repayment period. A loan that appears affordable during a period of strong earnings can become difficult to manage if income falls or other expenses increase.
A larger down payment can reduce the principal borrowed and therefore lower both the EMI and total interest. Choosing a shorter tenure can reduce interest costs, provided the higher monthly instalment remains manageable.
Before signing a loan agreement, borrowers should compare the annual interest rate, total repayment amount, processing fees, prepayment conditions and any other charges. They should also avoid taking on a larger loan simply because the lender offers a longer repayment period.
What Happens Next?
The vehicle financing market will depend on vehicle prices, household incomes, credit availability, interest rates and consumer demand.
The increase in average loan sizes and repayment tenures shows that financing has become an important part of car ownership. The expansion of demand into semi-urban and rural markets also creates opportunities for lenders and vehicle manufacturers.
At the same time, lenders will need to balance growth with responsible underwriting. The improvement in reported passenger vehicle delinquency provides a positive indication of portfolio performance, but it does not eliminate the possibility of future repayment stress.
For consumers, the central issue will remain affordability. A longer loan can make a vehicle easier to purchase today, but the total cost of borrowing and the ability to maintain repayments over several years should guide the decision.
The Bigger Picture
India’s vehicle financing market is evolving alongside changing consumer aspirations and broader access to formal credit. The 49% rise in average passenger vehicle loan amounts, combined with longer repayment tenures, reflects a shift towards financing higher-value purchases over extended periods.
The growth of rural and semi-urban borrowing and the expansion of two-wheeler credit demonstrate that vehicle finance is reaching a broader range of consumers. At the same time, the reported decline in passenger vehicle loan delinquency indicates that the expansion has coincided with improved portfolio performance over the period examined.
The long-term sustainability of this growth will depend on responsible lending, stable household finances and borrowers understanding the full cost of credit. Access to a loan can make vehicle ownership possible, but choosing a repayment structure that remains affordable throughout the loan period is essential.
Frequently Asked Questions
1. How much has the average car loan amount increased in India?
The average passenger vehicle loan amount rose 49% to ₹8.2 lakh between H1 2019 and H1 2026, according to TransUnion CIBIL’s Shifting Gears 2026 report.
2. What is the average car loan repayment tenure in India?
The average passenger vehicle loan tenure reached 62 months in H1 2026, an increase of five months from H1 2019.
3. Why are car loan amounts increasing?
The increase reflects higher vehicle prices, growing demand for SUVs and feature-rich models, and the spread of higher-value vehicle purchases into semi-urban and rural markets.
4. Is a longer car loan tenure better?
A longer tenure reduces the monthly EMI for a given principal and interest rate, but generally increases total interest paid. Borrowers should compare the monthly payment with the total repayment cost before choosing a loan period.
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