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Tata Capital > Blog > Loan for Vehicle > The Car Loan Industry in India to Grow in the Next Three Years

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The Car Loan Industry in India to Grow in the Next Three Years

The Car Loan Industry in India to Grow in the Next Three Years

Cars have become a popular choice for the middle class and the rich alike. More people are buying cars for personal and business use today. The popularity of cars has expanded the domestic auto market in India. Asia is now home to the second-largest domestic auto market in the world, says a report. In fact, estimates suggest that by 2020, 50% of the population is expected to own a vehicle.

Here are some of the factors affecting the growth in the car loan industry:

Preferences and Tastes are Changing

Gone are the days when a car lasted a decade or more. Given modern lifestyles, people keep changing their preferences; by replacing old cars with newer models for an enhanced driving experience. This has led to an increase in car sales, especially in the metros. This increase has resulted in more borrowers seeking car loans. As a result, there has been growth in the loan industry as well.

Lenders have Slashed their Car Loan Interest Rates

Post demonetisation, banks have seen an increase in their deposits. This has allowed lenders to cut their marginal cost of funds-based lending rate (MCLR). Car loans with a floating rate of interest depend on the lender’s MCLR. With a reduction in MCLR, car loans issued at floating interest rates have seen a rate cut. In fact, car loan interest rates are at an all-time low of 9.2% since 2011. These reductions could remain for some time. The rate cut makes a car loan more attractive to borrowers. They can afford a car on loan following such reductions. This can increase car sales.

Even Used Cars are in High Demand

If buying a new car is unaffordable, people can always try getting a used one. Used cars are becoming popular, and that has resulted in the used-car market growing at the rate of 15%, as per a study conducted by This amounted to a sale of 33 lakh units in 2016–17. The growth may place the Indian car market within the top-five cars markets in the world.

Now, online websites sell not just used cars, but loans as well can be availed easily. This and lower interest rates have favoured the growth of this industry. In fact, lenders such as Tata Capital offer loans of up to 90% of the car’s value. So, the used-car industry is also boosting the car loan industry in India.

Getting a loan has become easy through the online medium

Earlier, availing a car loan involved lengthy protocols. Today, the online loan marketplace has changed. Lenders are using online media to sell their loans. They offer this on their website or through the websites of online loan aggregators. You can search for a pre owned car loan, check your eligibility, and calculate the expected EMIs. You can apply for the loan and even avail funds online. This has brought about growth in the car loan industry.

If you too wish to buy a car sometime in the coming years, this is good news. With the car loan industry set to grow, you can get a car loan at affordable rates.