Rationale or aspirational? What drives car buying? Why Gen Z is moving towards higher-value purchases, big EMI and loans

Rising car prices and aspirational consumer choices are driving higher auto loan sizes, according to TransUnion CIBIL’s ‘Shifting Gears 2026 – Credit Drives Today’s Mobility’ report.

Among the demographics, Gen Z and younger Millennials are more visible among first-time car buyers widening the mobility credit market and increasing the role of formal credit in enabling mobility across India, it said.

It noted that between H1FY19 and H1FY26, the average passenger vehicle loan amount grew by 49% to ₹8.2 lakh, average loan tenure increased by five months to 62 months, and 51% of higher-value car loan borrowers were from semi-urban and rural India.

In the same period, two-wheeler loans became a mainstream credit product, implied by the composition of first-time borrowers who have over two years of credit history: 43% in 2026 vs 27% in 2019. Further, non-banking finance companies (NBFCs) continue to lead vehicle financing, accounting for 73% of two-wheeler loans and 37% of passenger vehicle loans, it added.

According to Bhavesh Jain, MD and CEO of TransUnion CIBIL, two-wheelers are closely linked with how young India studies, works and earns. “For a student travelling to college, a young professional commuting to work, or someone earning through the gig economy or pursuing an entrepreneurial opportunity, personal mobility can open up a much wider set of possibilities,” he said.

Further, Jain noted that the borrower behind a two-wheeler loan is also changing. “More consumers are coming in with an established credit history, and many continue to build wider credit relationships after the vehicle purchase. Two-wheeler finance is increasingly becoming part of a longer customer journey, with relevance extending well beyond the initial mobility need,” he added.

• Two-wheeler loans, traditionally seen as consumers’ first credit product, have now graduated into a mainstream credit product.
• Two-wheeler loans have moved beyond their traditional role as an entry point into formal credit ecosystem. First-time borrowers accounted for 39% of two-wheeler loan originations in H1 2026, down 19 percentage points from 2019, with their share declining from the pre-pandemic period.
• However, 43% of borrowers had more than two years of credit history at the time of origination, up 16 percentage points from 2019. This changing mix shows a growing share of credit-experienced consumers participating in the two-wheeler loan market.
• In H1 2026, 64% of borrowers for two-wheelers were from semi-urban and rural geographies (SuRu), and 43% were aged 30 years or younger.

The report also noted that passenger vehicle financing is increasingly reflecting a shift towards higher-value purchases. Preference for SUVs and feature-rich vehicles has contributed to higher vehicle prices and premiumisation, making financing more central to car ownership.

• The average passenger vehicle loan amount reached ₹8.2 lakh in H1 2026, up 49% from H1 2019, while the average repayment tenure increased by five months to 62 months.
• NBFCs) continue to hold the largest share of passenger vehicle loans at 37%, ahead of private banks at 26%, with an increase in share of 4 percentage points from 2019 to 2026.
• The active passenger vehicle borrower base reached 2.5 crore as of June 2026, 1.7 times the June 2019 level. Portfolio quality improved over the same period, with 90+ days past due balance-level delinquency declining by 95 basis points to 0.5%.

The report added that consumers are taking different routes into car ownership. Gen Z and younger Millennials are more visible among first-time car buyers and consumers moving from two-wheelers to cars, while core and older Millennials are increasingly represented among repeat buyers and consumers financing higher-value vehicles.

These shifts are also reaching wider markets.

• Rural originations among consumers moving from a two-wheeler to a car grew at a 15% CAGR since 2019, almost twice the 8% CAGR for overall auto-loan originations.
• Premiumisation is extending beyond metros too, with 51% of borrowers taking another higher-value car (HVC)2 loan in H1 2026 going to consumers in semi-urban and rural geographies, up six percentage points since 2019.

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“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,” Jain noted.

He added that premiumisation extending beyond the larger cities, reflects how ownership aspirations are changing across India.

Jocelyn Fernandes is a journalist and editor with nearly 13 years of experience covering the business, corporate, economy and markets beats in news.<br> As chief content producer for around three years at Livemint (Hindustan Times), Jocelyn publishes breaking stories, explainers, features and live blogs on a range of business and economy topics, including the Budget, corporate developments, stock markets, income tax, money and personal finance, cryptocurrency, government policy, impact of US tariffs, international developments and more.<br> Jocelyn's writing philosophy is focused on delivering news in an accurate and accessible format for readers. She thus focuses her news coverage on explainers and FAQs in order to breakdown business, corporate, economic, and policy topics that are of importance to everyday readers.<br> She holds a Bachelors in Mass Media (BMM) and Post Graduate Diploma (PGD) in Journalism and Communication and has previously written for online business and markets news site Moneycontrol (Network18), Business-to-business (B2B) trade publications — the industry magazines Power Today and Solar Today (ASAPP Media), and the national news agency United News of India (UNI).<br> Outside of work, Jocelyn keeps up-to-date with local and international news, enjoys reading fiction books, novels and short stories, and enjoys movies, travelling and art. <br> She can be found on X and LinkedIn, and reached by email: <a href="jocelyn.fernandes@htdigital.in">jocelyn.fernandes@htdigital.in</a> <br> X/ Twitter handle: <a href="https://x.com/scribeJocelyn">@scribeJocelyn</a> <br> LinkedIn: <a href="https://in.linkedin.com/in/jocelyn-fernandes-journalist">LinkedIn</a>

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