Vehicle finance portfolios of NBFCs are projected to reach ₹11 lakh crore by March 2027, growing at a steady 16–17% annually in the current and next fiscal, supported by policy measures and favourable macroeconomic conditions, according to Crisil.
The AUM growth of NBFCs will largely be led by used vehicle financing, which continues to outpace new vehicle loans across most large NBFCs. “Growth of used vehicle loans is expected to outpace that of new vehicle loans for most of the large NBFCs,” said Malvika Bhotika, Director, Crisil Ratings.
Why used vehicle loans are outpacing new financing
Used vehicle loan AUM has grown at a CAGR of around 15% between fiscals 2020 and 2025, compared with 11% for new vehicle loans. This trend will likely continue as the cost of owning a used vehicle is lower and financing offers better risk-adjusted returns. “Moreover, as financing of used vehicles provides better risk-adjusted returns, NBFCs are continuing to tap this segment,” Bhotika said.
Robust economic activity, GST rate rationalisation and lower systemic interest rates are expected to drive vehicle sales over the near to medium term.
While the used vehicle financing market is more established in commercial vehicles (CVs), demand for used cars and utility vehicles (UVs) has also strengthened in recent years. “Cars and UV financing will maintain strong growth momentum at ~23% annually over this fiscal and the next, propelled by rising demand for entry-level models after the GST rationalisation and continuing preference for premium models,” said Rounak Agarwal, Associate Director, Crisil Ratings.
He added that CV financing is expected to grow over 11%, supported by steady end-user industry demand and higher sales of lower-tonnage vehicles driven by replacement needs.
Growth in the 2–3 wheeler and tractor segments remains tied to rural consumption and agriculture. These segments are expected to post steady AUM growth of ~17% and 12%, respectively, helped by a healthy monsoon supporting farm incomes.
Shifting Segment Mix: Car/UV Share Rises
With faster expansion in car and UV financing, their share in NBFC vehicle finance AUM is set to rise. Meanwhile, CVs—though still the largest segment—will see a slight dip in share due to comparatively slower growth.
As of March 2025, CVs account for 44% of NBFC vehicle finance AUM, followed by cars and UVs (33%), 2–3 wheelers (14%) and tractors (9%). By FY27, Crisil expects the CV share to moderate to 41%, while cars and UVs increase to 37%.