India's vehicle finance market is undergoing a structural shift, with used-car loans and commercial vehicle lending emerging as the primary growth engines, according to a report released on Wednesday, 19 August 2026 by credit bureau CRIF High Mark. The findings point to deepening formalisation, rising ticket sizes, and expanding credit penetration well beyond major urban centres.

Commercial Vehicles and Used Cars Lead the Charge

Commercial vehicle loans recorded a 20.1 per cent five-year compound annual growth rate (CAGR) between June 2021 and June 2026, making them the market's primary growth engine, according to the report. Used-car loans outpaced even that, growing at a 26.2 per cent five-year CAGR over the same period.

The borrower base for used-car financing expanded 2.4 times in five years, a scale that signals the segment's transition from an informal, unorganised market to a mainstream credit category. Notably, 75 per cent of used-car loan originations in the latest quarter came from new-to-product borrowers — first-time formal credit users entering through the used-vehicle route.

Two-Wheeler Finance: Still the Largest, Still Expanding

Two-wheeler financing remains the single largest borrower segment in vehicle finance. The active borrower base rose from approximately 2.3 crore in June 2021 to 3.6 crore in June 2026, adding over a crore new participants to the formal credit system in five years.

Around 80 per cent of two-wheeler credit borrowers are new-to-product, underscoring the segment's role as a gateway for first-time borrowers. Two-wheeler loans also recorded a 53 per cent share in BT100 geographies — a classification covering smaller cities and towns beyond the top urban markets — reflecting the deepening rural and semi-urban reach of vehicle finance.

Premiumisation Reshapes Auto Loan Profiles

Auto loans are showing clear signs of a premium-led recovery. Average exposure per borrower grew at a 9.2 per cent CAGR between June 2021 and June 2026, while the share of auto loans above ₹15 lakh climbed from 27.6 per cent in Q1 FY25 to 29.8 per cent in Q1 FY27.

Overall vehicle-finance originations grew 17.1 per cent year-on-year in Q1 FY27, driven by higher ticket sizes alongside continued volume growth. The average auto-loan ticket size rose to ₹8.6 lakh. This is consistent with a broader consumer trend toward higher-value personal vehicles, even as entry-level two-wheeler loans continue to onboard new borrowers at the base.

Geographic Expansion Beyond Metro Markets

Vehicle-finance originations are increasingly penetrating BT100 geographies, indicating that demand is no longer concentrated in large cities. Commercial vehicle loans registered a 45 per cent BT100 share, reflecting the logistics and freight sector's expansion into smaller markets — a trend aligned with infrastructure development in tier-2 and tier-3 regions.

This geographic diversification reduces lender concentration risk and broadens the credit ecosystem, though it also brings underwriting complexity in markets with thinner credit histories.

Asset Quality Stabilising, with Some Caution

The overall risk environment is improving, the CRIF High Mark report noted. 'The overall risk environment is stabilizing, with later-stage delinquency improving across vehicle-finance segments,' it stated. Auto loans recorded the strongest asset quality among all segments, while commercial vehicle loans continued to experience comparatively higher early-stage delinquency — a recurring characteristic of the CV segment given its sensitivity to freight rate cycles and fuel costs.

Rising active loans per borrower and a growing multi-loan borrower cohort in certain segments suggest deeper and more sustained lender-borrower relationships, the report added. With origination volumes rising and risk metrics broadly stabilising, India's vehicle finance market appears positioned for continued structural expansion through the rest of FY27.