Indian buyers are taking on larger and longer vehicle loans as demand shifts towards SUVs and feature-rich cars, with smaller towns and rural areas driving an increasing share of more expensive purchases.
India’s car-buying habits are shifting quickly, with buyers increasingly opting for sport utility vehicles and feature-rich models rather than smaller cars, according to TransUnion CIBIL’s “Shifting Gears 2026” report. The credit bureau said the average passenger vehicle loan has climbed 49% since 2019, reflecting a broader move towards more expensive purchases and longer repayment periods.
In the first half of 2026, the average passenger vehicle loan rose to Rs8.2 lakh, while the typical tenure increased by five months to 62 months, or just over five years. A longer repayment period can reduce monthly instalments, but it also raises the total interest paid over the life of the loan. That trade-off has become more common as buyers stretch budgets to reach higher-end models, especially SUVs with more equipment and comfort features.
The trend is no longer confined to large cities. TransUnion CIBIL said 51% of borrowers taking loans for higher-priced second cars in the first half of 2026 came from smaller towns and rural areas, up six percentage points from 2019. The report also found that rural customers moving up from two-wheelers to cars have posted annual growth of 15% in new loans since 2019 on average, while younger buyers have been more active in purchasing their first vehicle and existing owners have been upgrading to pricier models.
Two-wheeler finance has expanded alongside car lending. By June 2026, outstanding two-wheeler loans had reached Rs1.76 lakh crore, 3.2 times the level in June 2019, while the number of active borrowers more than doubled to 3.3 crore. TransUnion CIBIL said non-bank lenders continue to play an important role in vehicle finance, accounting for 73% of two-wheeler loans and 37% of car loans.
The report’s message for buyers is straightforward: the monthly EMI is only part of the cost. Total interest, insurance, fuel and maintenance can materially affect affordability, especially when the repayment term is extended to make a larger purchase feel manageable.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
