Mumbai: Indian car buyers are taking increasingly larger and longer-tenure loans to fund higher-priced vehicles, a trend that could face a test as borrowing costs begin to rise following the Reserve Bank of India’s latest rate hike.

The average passenger vehicle loan rose 49% to Rs 8.2 lakh between H1 2019 and H1 2026, while the average repayment tenure increased by five months to 62 months, according to TransUnion CIBIL’s Shifting Gears 2026 report.

The shift comes at a time when vehicle demand remains strong. Total vehicle registrations rose 32% year-on-year in September to 25.37 lakh units, with passenger vehicle retail sales up 33% and two-wheelers up 32%, according to FADA data.

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However, the RBI’s 25-basis-point repo rate hike to 5.50% last week has begun feeding through to lending rates. Several lenders have raised repo-linked benchmark rates by up to 25 basis points, potentially increasing borrowing costs for fresh retail loans.

“Car ownership is increasingly being shaped by a combination of aspiration and affordability. Consumers are choosing higher-value and feature-rich vehicles, while larger loan amounts and longer tenures are helping make these purchases more manageable,” said Bhavesh Jain, MD and CEO, TransUnion CIBIL.

Higher vehicle prices and growing preference for SUVs and feature-rich models have driven premiumisation, making financing increasingly important for car purchases. The trend is no longer confined to large cities: 51% of borrowers taking higher-value car loans in H1 2026 were from semi-urban and rural markets, six percentage points higher than in 2019.

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NBFCs remain the largest financiers of passenger vehicles, accounting for 37% of live loans, followed by private banks at 26%. The active borrower base reached 2.5 crore as of June 2026, 1.7 times the June 2019 level. Delinquencies have meanwhile improved, with 90-plus-days-past-due balances falling 95 basis points to 0.5%.

Two-wheeler financing is also becoming more mainstream. Outstanding balances reached Rs 1.76 lakh crore in June, 3.2 times the 2019 level, while 43% of borrowers now enter with more than two years of credit history, compared with 27% in 2019.

Jain said premiumisation spreading beyond the metros reflected changing ownership aspirations across India.

“Two-wheelers are closely linked with how young India studies, works and earns,” Jain said, adding that more borrowers now enter the segment with an established credit history and subsequently build broader relationships across personal loans, credit cards, auto loans and home loans.