Report Overview

India used car loan market is expected to expand owing to rising disposable income among Indians and growing number of people who buy pre-owned cars, higher prices for new cars, and lowered tax rates for used cars.

India Used Car Loan Market, 2028 - Industry Trends & Forecast Report 2028

India Used Car Loan Market - Overview

Used car loans are available for a variety of automobiles, including hatchbacks, SUVs, and premium sedans. They are dominating the used car loan market by giving loans up to 95% of the used car value, flexible EMI repayment options, swift loan disbursement, flexible tenure, and low paperwork. The expansion of organized and semi-organized sectors can be ascribed to the evolution of the country's used automobile market. In addition, the reduction in the GST rate on used cars from 28% to 12–18% is driving the market. With firms steadily focusing on reducing diesel car production, the demand for compact diesel cars in the used car market is projected to increase, unless there is a reaction against diesel automobiles. Luxury car demand is also on the rise.

India Used Car Loan Market - Industry Trends and Market Forecast

Growth Drivers

NBFCs’ Increasing Focus on Funding Second-Hand Automobiles

In India, leading NBFCs such as Mahindra Finance, Shriram Finance, and Magma Fincorp have been forced to contend with escalating funding costs as a result of a liquidity crunch triggered by Infrastructure Leasing & Financial Services' default (IL&FS). Even lenders have increased their borrowers' screening and are now treading carefully in the higher-risk areas. To maintain their profits in light of this circumstance, numerous lenders have moved to funding old automobiles.

Restraints

Supply Constraints in Pre-Owned Market May Limit India Used Car Loan Market

As people did not sell their cars as quickly as they did before the pandemic, the used automobile market encountered supply limits, affecting exchanges and demand for used car loans. The significant negative impact of Covid-19 on the country's per capita income, drivers and small-scale fleet management organizations sought more cost-effective investments, such as purchasing old automobiles for small businesses. Many small logistics and transportation business owners, as well as those who had suffered losses in other enterprises, found it to be cost effective. These small-scale fleet management organizations preferred used cars through used car loans, due to budgetary constraints.

Segmental Coverage

India Used Car Loan Market - By Type

Hatchbacks, SUVs, and Sedans are the three vehicle types that make up the Indian Used Car Loan Market by type. Among them, the hatchback car type has dominated the Indian Used Car Loan Market and is expected to continue its leadership position during the forecast period. Ride comfort, safety, and lower noise and vibration when compared to competitors in the same segment are the major driving factors for the hatchback segment in the India Used Car Loan Market.

India Used Car Loan Market - By Financier

Banks, NBFCs, and other financial institutions make up the Indian Used Car Loan Market by financiers. In FY2021, banks accounted for the majority of the market share, followed by NBFCs. To attract more buyers and borrowers, banks are establishing new credit options, including loans for the purchase of used automobiles in the country depending on individual needs. When compared to NBFCs and OEMs, public and private sector banks have a larger client base, better customer service, and more competitive rates. However, in recent years, the emergence of NBFCs in non-metro and rural areas has contributed to the growth of NBFC market share.

India Used Car Loan Market - By Tenure

Individuals' increased money for discretionary spending has enabled them to swap cars in a relatively short amount of time. As a result, the average time spent maintaining an automobile in India has decreased significantly. Hence, purchasers of used cars can acquire a well-maintained and comparatively new automobile with features such as same-day delivery, funding for cars up to 8 years old, and 100% paperless & digital entire loan and RC Transfer support. As a result, the popularity for used auto loans among the current generation is growing. Car ownership has dropped dramatically in recent years, from 5-6 years for mass-market automobiles to less than 3 years for premium cars, compared to 5-6 years a few years ago. As these vehicles are well-maintained and equipped with cutting-edge technology, the quality of available cars in the used car market has improved.

Impact of COVID-19 on India Used Car Loan Market

Due to the COVID-19 outbreak in the second half of March 2020, and the resulting constraints of continual lockdowns and delays in India's travel and transportation networks, demand for personal vehicles, particularly used cars, has increased. As a result, the impact of COVID-19 pandemic on the India used car loan industry was negligible. The industry is expected to rise significantly as more people prefer private transportation and more financing options become accessible in the used automobile market. Due to the pandemic, purchasers have been forced to look for alternatives to new cars, and the used car market has a lot of room for expansion in this regard. Due to the pandemic's impact on new vehicle sales and production, the used automobile market is gaining traction among purchasers.

Restraints

Limited Financing Options for Pre-Owned Cars

In India, the scope of car financing is fairly limited. Typically, the relationship is confined to a single transaction. In India, the used automobile market is largely unorganized and unregulated. Despite the fact that a mandatory credit rating system (such as CIBIL) is in place, the turnaround time for financing is quite long due to many checks and balances.

Competitive Landscape

Mahindra Finance, Blue Carz, Magma Fincor, TSM Cars, Toyota U-Trus, HDFC, ICICI, Axis Bank, Punjab National Bank, State Bank of India, and Kotak Mahindra Bank are some of the top companies in Indian used car loan market.

Scope of the Report

By Vehicle Type

• Hatchback

• Sedan

• SUV

• Others

By Fuel Type

• Petrol

• Diesel

• Others

By Distribution Channel

• Dealership

• C2C

• Classifieds

• Others

By Category 

• Exported

• Domestic Sales

By Region

• North India

• South India

• West India

• East India