Used Vehicle Financing To Drive NBFC Vehicle Loan Portfolio To Rs 11 Lakh Crore: Crisil

(MENAFN- KNN India) New Delhi, Dec 10 (KNN) With Indian economy growing at healthy pace in the current fiscal 2025-26 and expected to continue its momentum in the next financial year too, vehicle loans portfolio of non-banking financial companies (NBFCs) is projected to reach Rs 11 lakh crore by March 31, 2027.

In a report released on Wednesday, research and rating firm Crisil said that assets under management (AUM) of vehicle loans of non-NBFCs will grow a steady 16-17% annually over the current and next fiscals to Rs 11 lakh crore on the back of policy support and macroeconomic tailwinds.

The report noted that growth of used vehicle loans will continue to outpace that of new vehicles.

"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," it said.

The Crisil report said that the vehicle finance business is cyclical and has high correlation with macroeconomic trends.

India's gross domestic product (GDP) is expected to post 7% year-on-year growth in FY26 after a faster-than-expected climb of 8.2% in the second quarter (July-September period). Growth is expected to remain healthy next fiscal, too, at 6.7%.

Crisil said that 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 would drive growth of vehicle sales over the near to medium term.

Malvika Bhotika, Director, Crisil Ratings said that growth of used vehicle loans is expected to outpace that of new vehicle loans for most of the large NBFCs.

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

Notably, increasing formalisation is also driving growth of loans for used vehicles.

Rounak Agarwal, Associate Director, Crisil Ratings noted that cars and UV (utility vehicle) financing will maintain strong growth momentum at 23% annually over this fiscal and the next on the back of rising demand for entry-level models after the GST rationalisation and continuing preference for premium models.

"For CV financing, growth is expected at 11%, supported by steady end-user industry growth and rise in lower-tonnage vehicle sales on account of high replacement demand. On the other hand, growth of the 2-3-wheelers and tractor segments are closely linked to rural consumption demand and agricultural dynamics. These segments will see steady AUM growth of 17% and 12%, respectively, given a healthy monsoon that would support farm incomes," he stated.

(KNN Bureau)

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