Used Car Financing Outpaces Auto Loans Over Five-Year Period Despite Higher Repayment Stress

Financing for used cars experienced faster growth than new auto loans over a five-year period ending in June 2026, according to a recent report by credit information company Crif High Mark. Industry data indicates that more Indian consumers are turning to formal financial institutions to fund pre-owned vehicle purchases, though this expansion is built on a lower initial base.

According to the report, the portfolio outstanding for used car finance grew at a compound annual growth rate (CAGR) of 26.2 percent. Total outstanding portfolio value rose from approximately ₹40,000 crore in June 2021 to ₹1.3 lakh crore by June 2026.

In comparison, portfolio outstanding for traditional auto loans grew at a CAGR of 17.6 percent over the same five-year timeframe. Total auto loan figures increased from ₹4.4 lakh crore in June 2021 to reach ₹9.9 lakh crore in June 2026.

Despite the accelerated growth in used car financing, lenders in this segment faced higher repayment stress. The report noted that loans unpaid for between 31 and 90 days reached 3.1 percent in the used car portfolio. By comparison, early-stage delinquencies for standard auto loans stood at 2.1 percent.

However, performance varied across delinquency buckets. For loans unpaid between 91 and 180 days, the used car segment recorded a delinquency rate of 1.0 percent, while standard auto loans performed slightly better at 0.6 percent.

The data also highlighted differences in borrower leverage profiles between the two categories. While both auto loans and used car loans showed a similar proportion of borrowers holding more than two active loans, used car borrowers exhibited a higher reliance on unsecured debt. Approximately 9.2 percent of used car borrowers also held unsecured consumption loans, such as personal loans, consumer durable loans, and credit cards, compared to 6.4 percent for standard auto loan borrowers.

Within the broader wheels finance sector—which encompasses two-wheelers, commercial vehicles, and passenger cars—overall asset quality is reportedly stabilising. Notably, the commercial vehicle financing segment recorded the second-fastest growth over the five-year period, expanding at a CAGR of 20.1 percent to reach ₹7.4 lakh crore, up from ₹3 lakh crore in June 2021.

"The faster growth in used car financing highlights a clear shift in consumer preference toward formal credit for pre-owned vehicle purchases. While the 26.2 percent CAGR indicates strong market demand and expanding financial inclusion, the higher early-stage delinquency rates of 3.1 percent and greater exposure to unsecured debt require lenders to maintain disciplined underwriting standards in the pre-owned vehicle segment." — Dr. Shishir Gupta, Founder & CEO, StartupLanes