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

According to the latest TransUnion CIBIL report, car loans in India grew by 49 percent over the past year, pushing the average passenger‑vehicle loan amount to ₹8.2 lakh. The surge reflects a shift toward premiumisation, with buyers in tier‑2 and tier‑3 cities increasingly opting for higher‑priced models rather than the low‑cost segment that traditionally dominated the market. Non‑bank financial companies (NBFCs) accounted for the majority of new disbursements, outpacing traditional banks as they offered flexible terms and quicker approvals. At the same time, credit growth for two‑wheelers continued its upward trajectory, expanding the overall auto‑finance portfolio.

The rise in premium vehicle financing can be linked to improving disposable incomes in smaller urban centres and a growing aspiration for features such as advanced safety systems, infotainment and better performance. NBFCs have capitalised on this trend by tailoring loan products that require lower down payments and by leveraging digital platforms to reach a broader customer base. Meanwhile, the two‑wheeler segment, which remains a primary mode of transport for many Indian households, benefited from competitive interest rates and promotional schemes that encouraged first‑time borrowers to upgrade. These dynamics collectively point to a more diversified demand profile across the auto sector.

The expanding loan book raises questions for regulators about credit risk, especially as NBFCs operate with higher leverage and may be more vulnerable to economic slowdowns. Consumers should weigh the long‑term cost of higher‑priced vehicles against their financial capacity, while lenders are likely to tighten underwriting standards to maintain asset quality. For Indian readers, the trend signals a shift in mobility preferences that could influence future vehicle production, infrastructure planning and environmental policy. Watch for updates on regulatory guidance and any changes in interest‑rate policies that could affect loan affordability.