NBFCs’ vehicle loan AUM to grow at 16-17% annually over FY26, FY27: Crisil

The rating agency Crisil has estimated assets under management (AUM) of vehicle loans of non-banking financial companies (NBFCs) to grow at a steady pace of 16-17% annually over the current and next fiscals. Further, NBFCs’ assets under management of vehicle loans is expected to rise to around ₹11 lakh crore by March 31, 2027, supported by policy measures and macroeconomic tailwinds. It noted that while sub-segments of vehicle loans will see differential growth trends, growth of used vehicle loans will continue to outpace that of new vehicle loans.

Crisil highlighted that the vehicle finance business is cyclical and has a high correlation with macroeconomic trends. Further, India’s economic growth, along with the benefits of the recent rationalisation of the goods and services tax (GST) rates and lower systemic interest rates, are expected to propel the growth of vehicle sales over the near to medium term. While the tailwinds will primarily drive sales of new vehicles and consequently their financing, continued focus on used vehicle loans by NBFCs will add to the traction.

It added that NBFCs’ used vehicle loan AUM has clocked a compound annual growth rate of around 15% between fiscals 2020 and 2025, compared with around 11% for new vehicle loans. This growth trend is expected to sustain over the medium term, as the unit economics of owning a used vehicle is lower than those of a new vehicle. Moreover, as financing of used vehicles provides better risk-adjusted returns, NBFCs are continuing to tap this segment.

It pointed out that while the market for used vehicle loans is more established for commercial vehicles (CVs), that for cars and utility vehicles (UVs) has gained ground over the past few years and is expected to gradually pick up for others as well. It noted that the share of cars and UV in vehicle finance AUM is expected to ascend amid rising pace of financing of cars and UV than that of other segments. On the other hand, while CV financing will continue to dominate, its share will moderate somewhat, on account of relatively lower growth.