India Vehicle Financing Market Research Report and Industry Forecast

India Vehicle Financing Market Size and Share:

The India vehicle financing market size was valued at USD 26.56 Billion in 2024. Looking forward, IMARC Group estimates the market to reach USD 51.80 Billion by 2033, exhibiting a CAGR of 6.90% during 2025-2033. North India dominated the market, holding a significant market share of 32.2% in 2024. The market is fueled by increasing disposable incomes, aspirations for automobile ownership, and easier access to credit, particularly in Tier II and Tier III cities. The burgeoning second-hand vehicle market is nudging consumers to seek out financing with flexible tenure, while banks and finance companies are widening their range of products, through digital means, which further increases the convenience factor and reach. Government policies backing up vehicle purchases, along with the emergence of fintech solutions, are also contributing to increasing the India vehicle financing market share.

The market in India is growing due to rising disposable incomes and easier access to loans. Many people in Tier II and Tier III cities now prefer financing for both new and used vehicles. Digital platforms and fintech players have made loan processing faster and less complicated. The push for electric vehicles, government schemes, and favorable interest rates also support India vehicle financing market trends. Younger buyers, first-time owners, and small business operators often rely on financing to manage costs. The used car segment has opened fresh opportunities for lenders as demand for affordable mobility increases. NBFCs and banks compete by offering flexible repayment options, quick approvals, and tie-ups with dealerships. Overall, the combination of economic growth, urban expansion, and technology adoption keeps pushing India’s vehicle finance market forward, covering cars, two-wheelers, and commercial vehicles.

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Mergers in India’s vehicle finance sector suggest that larger players are combining operations for stronger balance sheets and broader asset pools. Smaller financiers may face stiffer competition, pushing more market consolidation and new funding channels. Customers could see wider loan product options and competitive rates. For instance, in June 2025, the Tata Group announced plans to merge its vehicle financing division, which operates under the name Tata Motors Finance, with Tata Capital as part of a reorganization process ahead of its initial public offering. Tata Capital will be transferring assets to Tata Motors, a shareholder in the vehicle financing company, in exchange for the merger. Tata Motors will, therefore, hold approximately 5% of Tata Capital.

India Vehicle Financing Market Trends:

Online Loan Approvals and Digital Transformation

The Indian automotive finance sector is witnessing a radical digital transformation with more consumers turning toward online loan requests and approvals. Online channels have made the process of lending much simpler, accessible, and convenient, particularly among tech-savvy younger segments. For instance, Maruti Suzuki launched Maruti Suzuki Smart Finance in 2020, an innovative AI-powered, online end-to-end vehicle financing platform that provides customers with convenient and accessible vehicle financing options online. Banks are also using technology to provide faster turnaround times, less paperwork, and greater transparency, thus enhancing the customer experience. This transition toward digitalization is also making it possible for lenders to penetrate underserved markets in Tier II and Tier III cities, where banking infrastructure might be weak. Online loan approvals are therefore becoming a major trend fueling the India vehicle financing market growth.

Penetration into Tier II and Tier III Cities

Traditionally, vehicle financing in India has been limited to major urban centers. Yet, there is a perceptible trend as banking companies are targeting Tier II and III cities more. Increased disposable incomes, urbanization, and shifting consumer desires in these areas are fueling the demand for auto loans. The disposable per capita income in India reached USD 2.54 Thousand in 2023 and is expected to reach USD 4.34 Thousand by 2029, as per the India Brand Equity Foundation (IBEF). To tap this emerging market, lenders are providing tailor-made loan products with flexible terms, less documentation, and lower interest rates. While this growth is increasing the customer base, it is also shaping the India vehicle financing market outlook.

Increased Popularity of Used Car Financing

Used cars have witnessed an immense surge in demand in India, resulting in the corresponding increased popularity of used car financing. Factors such as cost savings, shorter tenor, and aspirations of individual mobility are compelling consumers to shift toward used vehicles. According to the IMARC Group, the India used car market size was valued at USD 36.00 Billion in 2024 and is further expected to reach USD 101.00 Billion by 2033, exhibiting a CAGR of 12.30% from 2025-2033. Non-Banking Financial Companies (NBFCs) are leading this movement with value-added finance offerings designed to address the used vehicle space. This includes streamlined documentation, repayment flexibility, and competitive rates, facilitating ownership of a vehicle among a larger group. As per the India vehicle financing market forecast, financing for used vehicles is expected to become an indispensable part of the Indian automotive finance market.

India Vehicle Financing Industry Segmentation:

IMARC Group provides an analysis of the key trends in each segment of the India vehicle financing market, along with forecasts at the regional and country levels from 2025-2033. The market has been categorized based on vehicle type, loan provider, vehicle condition, and purpose type.

Analysis by Vehicle Type:

• Passenger Vehicles
• Commercial Vehicles
• Two-Wheelers
• Electric Vehicles (EVs)

Passenger vehicles stood as the largest vehicle type in 2024, holding around 48.0% of the market because of rising disposable incomes, urbanization, and easy loan access. Many first-time buyers prefer financing instead of upfront payments, boosting demand for auto loans. Banks and NBFCs offer flexible schemes and competitive rates, pushing middle-class households to upgrade from two-wheelers to cars. Younger buyers, drawn to features like SUVs and compact cars, also depend heavily on credit options. Used passenger vehicles add another layer, as many people choose second-hand cars with finance support. This segment keeps loan volumes high for lenders, ensuring steady business. Better road infrastructure and government focus on mobility push people toward owning personal cars instead of relying on public transport. Altogether, passenger vehicles remain the biggest piece in India’s vehicle finance puzzle, driving disbursements and market expansion.

Analysis by Loan Provider:

• Banks
• Non-Banking Financial Companies (NBFCs)
• Original Equipment Manufacturers (OEMs) Financing
• Credit Unions
• Others

Banks led the market with around 44.3% of market share in 2024 as they have strong branch networks, trusted reputations, and access to cheap funds. Most buyers prefer banks for car loans due to competitive interest rates, quick processing, and pre-approved offers for existing customers. Public and private banks target salaried and self-employed buyers with tailored EMI plans and longer tenures, making monthly payments affordable. Many banks partner with dealerships for on-the-spot loan approvals, speeding up sales. Digital banking has made applications, document submissions, and disbursals simpler, pulling more customers into formal credit. Banks also finance both new and used vehicles, widening their reach beyond metros into smaller towns. Attractive seasonal offers and bundled deals keep loan demand strong. By capturing the trust of middle-class and urban households, banks remain the main driver behind India’s growing vehicle finance market.

Analysis by Vehicle Condition:

• New Vehicles
• Used Vehicles

New vehicles led the market with around 74.9% of market share in 2024 since more people want the latest models with better safety, mileage, and tech. Buyers see new cars as status symbols and prefer loans to manage high prices without hurting their savings. Dealers and manufacturers partner with lenders to offer low down payments, zero processing fees, and festival discounts, making new car loans appealing. Many urban families are shifting from two-wheelers to small cars or SUVs, boosting fresh loan demand. Easy online loan applications and doorstep services add to this momentum. New cars also come with better resale value and warranties, encouraging buyers to choose financing. Lenders prefer funding new vehicles because the risk is lower compared to older ones. All this keeps the flow of new car loans steady, making the segment a core driver for India’s vehicle finance growth.

Analysis by Purpose Type:

• Loan
• Leasing

Loan led the market with around 88.5% of market share in 2024 by bridging the gap between rising vehicle costs and buyers’ limited upfront funds. With easy EMIs, people can own cars without heavy one-time payments, making loans the go-to option. Banks, NBFCs, and captive finance arms design attractive loan products, low interest rates, long tenures, and minimal paperwork, which push more customers to borrow. Digital platforms and instant approvals make the process hassle-free, boosting demand even in smaller towns. Salaried workers, first-time buyers, and young professionals rely on loans to buy cars they couldn’t afford outright. Pre-approved loans and dealer tie-ups sweeten the deal further. Loans cover both new and used vehicles, expanding market reach. The steady rise in loan disbursements keeps the entire vehicle market active, turning the loan segment into a backbone for India’s vehicle finance industry.

Regional Analysis:

• North India
• South India
• East India
• West India

In 2024, North India accounted for the largest market share of 32.2%, owing to several reasons working together. Strong economic activity in states like Delhi, Punjab, Haryana, and Uttar Pradesh drives high demand for personal and commercial vehicles. Rural and semi-urban areas add to this with steady two-wheeler and small commercial vehicle purchases, often financed through loans. Banks and NBFCs have an extensive branch network across North India, making vehicle loans more accessible even in remote towns. People here have a strong preference for owning personal vehicles due to limited public transport in many regions. Seasonal income patterns in agriculture-heavy areas push buyers to opt for flexible financing schemes. Local dealerships have tie-ups with multiple lenders, offering competitive loan deals that encourage higher uptake of financed vehicle purchases compared to other parts of the country.

Competitive Landscape:

India's vehicle financing market is experiencing notable shifts, with a strong emphasis on electric vehicle (EV) financing. Collaborations between financial institutions and EV manufacturers, such as the partnership between Greaves Finance's evfin and Muthoot Capital, are facilitating tailored financing solutions for EV buyers. Government initiatives, including the FAME scheme and state-level subsidies, are further propelling EV adoption and financing. Digital transformation is streamlining loan approvals, particularly in Tier II and III cities, enhancing accessibility for a broader consumer base. The used vehicle segment is also gaining traction, with flexible financing options becoming more prevalent. Overall, the convergence of government support, strategic partnerships, and digital innovation is shaping the current landscape of vehicle financing in India.

The report provides a comprehensive analysis of the competitive landscape in the India vehicle financing market with detailed profiles of all major companies.

Latest News and Developments:

• June 2025: Maruti Suzuki India Limited (MSIL) signed a Memorandum of Understanding (MoU) with Equitas Small Finance Bank in order to establish a collaborative alliance for customer vehicle financing. This partnership will increase the availability and affordability of Maruti Suzuki automobiles for a wider spectrum of consumers by offering retail financing options for new, used, and commercial vehicles.
• May 2025: Maruti Suzuki India Limited (MSIL) officially signed a Memorandum of Understanding (MoU) with SMFG India Credit (SMICC). As part of this agreement, SMICC will offer personalized vehicle financing services to Maruti Suzuki Super Carry & Eeco Cargo customers. With this partnership, Maruti Suzuki intends to assist its dealer partners in providing their clients with all-inclusive vehicle financing options.
• April 2025: Insurtech firm RenewBuy officially entered the vehicle financing industry with the launch of RB Wheelz, the company’s dedicated brand for comprehensive auto loan solutions. The business has improved its state-of-the-art digital insurance platform, establishing a cohesive ecosystem where customers can easily access insurance solutions, balance transfers, top-up loans, and financing for new cars all in one place.
• March 2025: Poonawalla Fincorp Limited (PFL) officially introduced its Commercial Vehicle (CV) Secured Loan Business. The new program will offer financing for new and used commercial vehicles from all major manufacturers, including small, light, intermediate, and heavy vehicles.

India Vehicle Financing Market Report Scope:

Key Benefits for Stakeholders:

• IMARC’s industry report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the India vehicle financing market from 2019-2033.
• The research report provides the latest information on the market drivers, challenges, and opportunities in the India vehicle financing market.
• Porter's five forces analysis assist stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the India vehicle financing industry and its attractiveness.
• Competitive landscape allows stakeholders to understand their competitive environment and provides an insight into the current positions of key players in the market.