New Delhi, Dec 10 (NationPress) The Assets Under Management (AUM) of vehicle loans from India's non-banking financial companies (NBFCs) is forecasted to expand at a robust annual rate of 16-17 percent, aiming for a total of Rs 11 lakh crore by the conclusion of March 2027. This growth is anticipated to be bolstered by favorable policy measures and positive macroeconomic factors, as indicated in a report released on Wednesday.

Different segments within vehicle loans are expected to exhibit varying growth patterns, with the sector for used vehicle loans projected to surpass that of new vehicle loans.

According to Crisil Ratings, "The vehicle financing sector is cyclical and closely linked to broader economic conditions. India’s gross domestic product (GDP) is predicted to rise by 7 percent this fiscal year, an upgrade from the previous forecast of 6.5 percent, following an unexpected surge of 8.2 percent in Q2."

Growth is also predicted to remain strong next fiscal year, at 6.7 percent.

The economic expansion in India, alongside the recent adjustments to goods and services tax (GST) rates and lower interest rates, is likely to drive vehicle sales in the near to medium term, the report highlights.

While these favorable conditions will primarily stimulate sales of new vehicles and their financing, NBFCs’ ongoing emphasis on used vehicle loans will further enhance market momentum.

“The growth rate for used vehicle loans is projected to outstrip that for new vehicle loans at many leading NBFCs. Our research reveals that the AUM for used vehicle loans has achieved a compound annual growth rate of 15 percent from fiscal years 2020 to 2025, in contrast to 11 percent for new vehicle loans,” stated Malvika Bhotika, Director at Crisil Ratings.

This upward trajectory is expected to persist in the medium term, as the cost of owning used vehicles is lower compared to new ones.

Furthermore, financing used vehicles offers better risk-adjusted returns, prompting NBFCs to focus on this segment, Bhotika added. The increasing formalization of the market is also a factor driving the demand for loans for used vehicles.

Among different segments, the market for used vehicle loans is already well-established for commercial vehicles (CVs), while the markets for cars and utility vehicles (UVs) have gained traction in recent years and are expected to gradually expand into other categories as well, the report emphasized.

Thus, the overall growth across sub-segments will be influenced by both demand and supply dynamics for new and used vehicle loans, according to the analysis.