Loading article...
The used-car financing segment in India has recorded a 34% compound annual growth rate (CAGR) between FY20 and FY25, reaching Rs 1,10,000 crore, according to a CRISIL report. Non-Banking Financial Companies (NBFCs) have driven this growth, unlocking demand in previously underserved geographies.
The rise of used-car sales is linked to the muscle of NBFCs, which have secured a dominant market share in the two-wheeler segment. NBFCs have successfully penetrated rural and semi-urban markets, leveraging specialized underwriting and a physical presence.
The acceleration in auto lending is supported by a significant easing of monetary policy, with the Reserve Bank of India implementing a cumulative 125-basis-point repo rate cut in CY2025. This has led to reduced EMIs and improved credit affordability for consumers.
The auto loan segment has seen a normalization of asset quality metrics, with the Gross Non-Performing Assets (GNPA) rate expected to close between 3.8% and 4.2% in FY26. The contribution of auto loans remains at 11% of NBFC credit, driven by the increasing formalization of the Indian economy and NBFCs' ability to finance the 'Middle India' aspiration for mobility.
Looking ahead, the growth of the used-car financing segment is expected to continue, driven by the increasing demand for mobility in semi-urban and rural areas. The Reserve Bank of India's monetary policy and the ability of NBFCs to adapt to changing market conditions will be key factors in shaping the sector's outlook.