Used-Car Loans are emerging as India’s fastest-growing vehicle finance segment as the market shifts from cash purchases to formal financing, according to CRIF High Mark’s latest research.

Key Highlights

• Used-car loans emerged as India’s fastest-growing vehicle finance segment, according to CRIF High Mark’s latest industry data.
• Strong demand for pre-owned vehicles is driving growth in used-car financing as borrowers seek affordable mobility options.

Used-car financing recorded a 26.2% five-year compound annual growth rate (CAGR) between June 2021 and June 2026, outpacing commercial vehicle loans, auto loans and two-wheeler financing, according to the credit bureau's "Wheels & Ambition: A Research Report on India's Vehicle Finance Landscape."

More strikingly, the borrower base for used-car loans expanded 2.4 times over the same period, underscoring the growing formalisation of financing for pre-owned vehicles. The trend suggests that buying a second-hand car is increasingly becoming a mainstream credit transaction, rather than a purchase made entirely from savings or informal sources.

Lenders Tighten Risk Profile Even as Loans Grow

At the same time, lenders appear to be tightening their overall risk approach. The share of unsecured borrowers has fallen from 11% to 9.2%, pointing to a broader shift toward secured lending. However, the share of borrowers with two or more active loans has risen from 4.8% to 6.7%, signalling a rise in multiple-loan exposure across the segment.

Early-stage delinquency, with portfolio-at-risk (PAR) in the 31-90 day bucket at 3.1%, remains a watch point, although the more serious 91-180-day delinquency bucket continues to remain under control.

Three in Four Used-Car Borrowers Are New to the Product

One of the most notable findings for borrowers is that 75% of used-car loan originations in Q1 FY27 came from new-to-product borrowers - meaning three out of every four people taking a used-car loan were doing so for the first time with this particular credit product.

For buyers, however, a loan can make a used car more accessible while also increasing the overall cost of ownership. Factors such as interest rate, loan tenure, processing fees and down payment can significantly affect the final amount paid for the vehicle. For instance, a buyer financing a Rs 6 lakh used car needs to look well beyond the sticker price, since a higher interest rate or longer repayment period can substantially increase the total amount paid over the life of the loan.

Also Read: Passenger Vehicle Sales Jump 24% in June, Near 4 Lakh Mark

Used Cars Growing Faster Than New-Car Finance

This trend comes as the broader vehicle-finance market moves away from purely volume-driven growth. Overall vehicle-finance originations grew 17.1% year-on-year in Q1 FY27, supported by higher ticket sizes and continued growth across segments. However, the used-car segment is expanding at a much faster pace over the longer term, with its 26.2% five-year CAGR highlighting how quickly it is gaining ground.

Commercial vehicle financing is another major growth engine within the space, recording a 20.1% five-year CAGR between June 2021 and June 2026.

What Used-Car Financing Means for Buyers

For consumers, the expansion of formal used-car finance makes pre-owned vehicles easier to purchase without paying the entire amount upfront. However, financing a used vehicle requires a different calculation compared to financing a new car. Buyers are advised to consider the purchase price and down payment, the interest rate offered, processing and other loan-related charges, loan tenure, the vehicle's age and remaining useful life, insurance and maintenance costs, and the total interest payable over the loan period. A lower monthly EMI does not necessarily mean cheaper car loans — extending the tenure can reduce the monthly burden while increasing the total interest paid over time.

Vehicle Loans Expand Beyond India's Major Cities

The formalization of vehicle finance is also spreading well beyond major urban centres. CRIF High Mark's data shows that 53% of two-wheeler loan originations and 45% of commercial vehicle loan originations came from BT100 geographies, highlighting growing lender penetration in smaller markets.

New Cars Are Also Getting More Expensive

At the other end of the vehicle-finance spectrum, the data points to clear premiumisation trends. The average exposure per borrower of auto-loans increased at 9.2% CAGR from June 2021 to June 2026, and the average ticket size of auto-loans stood at Rs 8.6 lakh. While used car financing is booming, there is also a corresponding increase in borrowers availing financing for new cars as the percentage of auto loans above Rs 15 lakh increased from 27.6% in Q1 FY25 to 29.8% in Q1 FY27..

Two-Wheelers Remain the Entry Point to Formal Credit

Two-wheelers continue to have the largest borrower base among all vehicle-finance segments. The number of two-wheeler borrowers surged from approximately 2.3 crore in Jun'21 to 3.6 crore in Jun'26. Importantly, 80% of those borrowing on two wheels were new-to-product customers, indicating that two-wheeler finance was a substantial channel for accessing formal credit for first-time borrowers. The premium and electric two-wheelers segment (more than Rs 1 lakh) also grew from 38% to 43% during the same period.

Asset Quality Shows Signs of Stabilization, But Risks Remain

The rapid expansion in vehicle loans has also come with some warning signals. CRIF High Mark noted that later-stage delinquency has improved across vehicle-finance segments, suggesting some stabilization in overall asset quality. Auto loans currently show the strongest asset quality among segments, while commercial vehicle loans continue to show relatively higher early-stage delinquency.

There is also evidence of rising multi-loan exposure among certain borrower categories - in commercial vehicle financing specifically, the share of borrowers with two or more active loans increased from 15.7% in June 2021 to 19.9% in June 2026.