India Vehicle Loans: High Debt & Used Car Boom

If you’ve recently taken out a vehicle loan in India, it’s crucial to understand the broader credit landscape. A recent report by CRIF High Mark indicates that nearly half of vehicle-loan borrowers are carrying substantial debt, with a total credit exposure of ₹60 lakh or more.

This significant figure isn’t just about your car loan; it often includes outstanding amounts from home loans, personal loans, and credit cards. When you have multiple credit relationships, your repayment obligations and overall financial leverage increase, which is something to keep an eye on.

Used Cars Drive New Credit Trends

Used-car financing is rapidly expanding, making it the fastest-growing segment in vehicle finance. Its portfolio saw a **26.2% five-year Compound Annual Growth Rate (CAGR)** between June 2021 and June 2026, showing a clear shift in how people acquire pre-owned vehicles.

The borrower base for used cars expanded by **2.4 times** in the same period, with about **75%** of these loan originations coming from individuals new to the product. While this growth suggests more formalized financing, it also introduces new credit considerations, especially as multi-loan used-car borrowers (those with two or more active loans) rose from 4.8% to **6.7%** over five years.

Key Numbers to Know

• Total credit exposure for nearly half of vehicle-loan borrowers: **₹60 lakh or more**
• Used-car financing five-year CAGR (June 2021-June 2026): **26.2%**
• Used-car borrower base expansion in five years: **2.4 times**
• New borrowers in used-car loan originations: Approximately **75%**
• Multi-loan used-car borrowers increase: From 4.8% to **6.7%** over five years

Understanding Delinquency Signals

Even though a used car might have a lower price tag, it doesn’t automatically mean lower financial stress. Factors like interest rates, loan tenure, insurance, maintenance, and your existing EMIs all add to the true cost of ownership.

Used-car loans recorded an early-stage delinquency (PAR 31–90) of **3.1%**, which is an important early warning for missed payments. This higher early-stage delinquency requires careful monitoring by lenders as the borrower pool grows.

Regional Differences in Loan Stress

Across India, different regions show varying levels of loan stress. For instance, Uttar Pradesh reported a **1.3% PAR 91–180 delinquency** in used-car financing, despite seeing a **32.6% five-year CAGR** in the segment. Karnataka and Telangana also experienced significant growth with **1% delinquency**.

National auto loans overall grew by **17.6%** with a lower PAR 91–180 of **0.6%**. However, two-wheeler loans show the highest late-stage stress across all categories, with a pan-India PAR 91–180 of **1.2%**, even with a **19.7% five-year CAGR**. Madhya Pradesh, Bihar, and Uttar Pradesh are noted as states with higher delinquency rates for two-wheeler loans.

What This Means for Your Finances

Understanding these trends is vital for managing your own money. The decrease in the share of unsecured borrowers in the used-car segment, from 11% to **9.2%**, suggests some de-risking by lenders. However, the overall picture highlights the importance of carefully assessing your total debt burden before taking on new loans.

Always consider how any new vehicle loan fits into your existing financial commitments. This helps ensure you maintain a healthy credit profile and avoid unnecessary financial strain.