Auto Loan Trends 2026: Average Car Loan Rises 49% to ₹8.2 Lakh, Rural Buyers Drive Growth
India’s vehicle financing market is changing as car prices rise, consumers increasingly prefer premium vehicles, and younger buyers enter the market. According to TransUnion CIBIL’s report, Shifting Gears 2026 – Credit Drives Today’s Mobility, auto loans are playing a growing role in helping Indians purchase vehicles, with Gen Z and younger Millennials becoming more visible among first-time car buyers.
The report highlights significant changes in borrowing patterns between the first half of FY2019 and the first half of FY2026. During this period, the average passenger vehicle loan amount increased by 49% to ₹8.2 lakh, while the average repayment tenure rose by five months to 62 months. Semi-urban and rural consumers also accounted for 51% of borrowers taking higher-value car loans in the first half of 2026.
Non-banking financial companies (NBFCs) continue to play an important role in vehicle financing, accounting for 73% of two-wheeler loans and 37% of passenger vehicle loans.
Two-Wheeler Loans Become a Mainstream Credit ProductTwo-wheeler financing is no longer limited to people entering the formal credit system for the first time. TransUnion CIBIL’s report shows that the borrower profile has changed, with a growing number of consumers having an established credit history before taking out a two-wheeler loan.
First-time borrowers accounted for 39% of two-wheeler loan originations in the first half of 2026, a decline of 19 percentage points compared with 2019. Meanwhile, the proportion of borrowers with more than two years of credit history increased to 43%, up 16 percentage points from 2019.
The report also found that 64% of two-wheeler borrowers in H1 2026 came from semi-urban and rural areas, while 43% were aged 30 or younger. These figures highlight the importance of two-wheelers for younger consumers and households outside major urban centres.
Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL, said two-wheelers are closely connected to how young Indians study, work and earn. Personal mobility can create more opportunities for students travelling to college, professionals commuting to work, gig workers and aspiring entrepreneurs.
Jain also noted that two-wheeler financing is increasingly becoming part of a longer credit journey. Consumers with established credit histories may continue to build broader financial relationships after purchasing a vehicle.
Average Car Loan Reaches ₹8.2 Lakh as Premiumisation GrowsPassenger vehicle financing is also changing as buyers increasingly choose SUVs and vehicles with more features. These preferences have contributed to higher vehicle prices, making loans more important for consumers planning to purchase a car.
The average passenger vehicle loan amount reached ₹8.2 lakh in H1 2026, marking a 49% increase from H1 2019. Over the same period, the average repayment tenure extended by five months to 62 months, allowing borrowers to spread repayments over a longer period.
NBFCs held the largest share of passenger vehicle loans at 37%, followed by private banks at 26%. The NBFC share increased by four percentage points between 2019 and 2026.
The number of active passenger vehicle borrowers also expanded. By June 2026, the active borrower base had reached 2.5 crore, or 1.7 times the level recorded in June 2019.
At the same time, portfolio quality improved. The balance-level delinquency rate for passenger vehicle loans overdue by more than 90 days declined by 95 basis points to 0.5% over the period covered by the report.
Gen Z and Younger Millennials Drive New Car Ownership TrendsThe report identifies different patterns among consumers entering the car market. Gen Z and younger Millennials are becoming more prominent among first-time car buyers and people upgrading from two-wheelers to cars. Core and older Millennials, meanwhile, are more represented among repeat buyers and consumers financing higher-value vehicles.
The shift towards car ownership is also gaining momentum beyond metropolitan areas. Since 2019, rural originations among consumers moving from a two-wheeler to a car have grown at a compound annual growth rate (CAGR) of 15%. This is almost twice the 8% CAGR recorded for overall auto-loan originations.
Premium vehicle purchases are also spreading across semi-urban and rural markets. In H1 2026, these areas accounted for 51% of borrowers taking another higher-value car loan, an increase of six percentage points since 2019.
Jain said car ownership is increasingly influenced by both consumer aspirations and affordability. Buyers are opting for higher-value, feature-rich vehicles, while larger loan amounts and longer repayment periods are helping make these purchases more manageable. He added that the spread of premiumisation beyond major cities reflects changing vehicle ownership aspirations across India.
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