India Used Car Financing Market Outlook to 2030

India Used Car Financing Market Overview

• The India Used Car Financing Market is valued at USD 8 billion, reflecting significant growth driven by rising demand for affordable transportation and an increasing preference for second-hand vehicles. The market has seen robust growth due to several factors, including the shift in consumer behavior post-pandemic, where affordability and financial constraints have led many to consider used cars over new ones.

• In the market, major urban areas such as Mumbai, Delhi, and Bengaluru dominate due to their large populations, higher per capita income, and urban congestion that leads to greater demand for private vehicles. The availability of multiple financing options and the growing role of Non-Banking Financial Companies (NBFCs) in these regions contribute to their dominance. Furthermore, these cities host a larger number of certified pre-owned car dealerships and have stronger infrastructure to support digital lending platforms.
• The Indian government has been actively promoting financial inclusion, with over 475 million bank accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) by 2024. This initiative increases access to formal credit channels, allowing a broader section of the population to avail of loans for used car purchases.

India Used Car Financing Market Segmentation

By Car Type: The market is segmented by car type into hatchbacks, sedans, SUVs, and multi-purpose vehicles (MPVs). Hatchbacks hold a dominant market share in this segment, owing to their affordability, fuel efficiency, and smaller size, which suits congested city environments. Consumers prefer hatchbacks due to their lower maintenance costs and easier maneuverability in urban traffic, making them an ideal choice for first-time buyers seeking affordable transportation options.

By Financier: The market is also segmented by financier type into OEMs, banks, and NBFCs. NBFCs dominate this segment due to their flexible lending policies and quicker loan disbursement processes, which attract a significant portion of buyers. Unlike traditional banks, NBFCs provide easier access to credit for customers with lower credit scores, contributing to their dominance in the used car financing space.

India Used Car Financing Market Competitive Landscape

The market is moderately fragmented, with several key players from various sectors, including OEMs, NBFCs, and banks, competing for market share. The market is characterized by the presence of strong regional players and a few dominant national brands.

India Used Car Financing Market Analysis

Market Growth Drivers

• Increasing Demand for Personal Mobility: In India, the growing demand for personal mobility has driven the need for used cars, especially in rural and semi-urban areas. With more than 350 million registered vehicles in India as of 2023, the increasing volume of used cars in circulation offers significant opportunities for used car financing.
• Expanding Middle-Class Population: Indias middle-class population is projected to grow by an additional 50 million individuals by 2024, increasing the demand for used cars as a cost-effective mobility solution. This rise in the population looking for affordable financing options directly impacts the used car financing market.
• Affordable Financing Options: As of 2024, India has witnessed a rise in financial products targeting the used car market. Financial institutions are offering competitive interest rates, flexible repayment options, and low down payment schemes, thus driving market growth. The growing number of used car finance providersover 15 prominent players in the markethas led to enhanced competition, benefiting consumers with lower interest rates and better loan products.

Market Challenges

• Lack of Credit Access in Rural Areas: As of 2024, nearly 70% of Indias population resides in rural areas, but only 30% of financing options are available in these regions. The lack of financial literacy and infrastructure in these areas limits credit access, slowing the growth of the used car financing market.
• Depreciating Value of Used Cars: The depreciation of used car values is a major challenge for lenders. The value of a used car can drop significantly in just a few years, which increases the risk for finance companies if borrowers default on their loans. In 2023, it was reported that the average value of a 5-year-old car in India depreciates by over INR 150,000, which affects the amount that can be financed and the risk that lenders are willing to take.

India Used Car Financing Market Future Outlook

The India Used Car Financing industry is expected to experience continued growth over the next five years, driven by increasing consumer demand for affordable transportation and the expansion of digital lending platforms.

Future Market Opportunities

• Growth in Financing Penetration in Rural Markets: Rural India is expected to see a 20% increase in financing penetration for used cars by 2029, driven by government initiatives and the entry of more banks and NBFCs into rural areas. With improved access to formal credit, more rural customers will be able to purchase used cars, contributing to the overall growth of the used car financing market.
• Expansion of Digital Loan Platforms: By 2029, the use of digital loan platforms for used car financing is expected to expand, with an estimated 60% of all used car loans being disbursed through digital channels. This growth will be driven by advancements in technology and increasing consumer trust in online financial transactions.