Average passenger vehicle loans have risen to ₹8.2 lakh, a 49% jump over seven years, driven by a preference for SUVs and credit demand from smaller towns. While current delinquency rates are at record lows, the recent Reserve Bank of India repo rate hike to 5.50% may increase borrowing costs for consumers.
The Indian passenger vehicle market is seeing a major shift in financing patterns, with the average loan size climbing to ₹8.2 lakh by mid-2026. This represents a 49% increase compared to 2019, reflecting a clear move toward higher-value vehicles. Consumers are increasingly opting for SUVs and premium features, which require larger financing amounts. Data from TransUnion CIBIL shows that this trend is no longer limited to large cities, as 51% of high-value car loans are now taken by borrowers in semi-urban and rural regions.
The credit landscape is largely shaped by Non-Banking Financial Companies (NBFCs), which have maintained a strong grip on the sector. NBFCs currently hold a 37% share in passenger vehicle financing and a dominant 73% share in the two-wheeler segment. This growth is paired with longer repayment periods, which have stretched to an average of 62 months as buyers adjust to higher loan amounts.
Despite the rise in debt sizes, lenders have seen an improvement in repayment behavior. The 90-day-plus delinquency rate—a metric used to track loans that are significantly overdue—dropped to 0.5% in mid-2026, marking a significant improvement from the 1.45% levels seen in 2019. This suggests that the current pool of borrowers is maintaining better financial discipline.
However, the sector faces new challenges following the Reserve Bank of India's decision to increase the repo rate by 25 basis points to 5.50% in October 2026. This hike is expected to push up lending rates, which could make car loans more expensive for consumers and potentially slow down new demand. Investors may track whether this rise in borrowing costs impacts the current trend of high-value loan originations or puts pressure on lender margins. Additionally, while overall asset quality remains healthy, the industry will be watching for signs of stress among multi-loan borrowers as higher interest rates take effect.