Luxury car financing market surges as more Indians trade up

The luxury vehicle market in India is witnessing substantial growth, paralleled by rising demand for loans to facilitate these high-end purchases. Leading banks such as HDFC Bank, ICICI Bank, Bank of Baroda, Axis Bank, and Kotak Mahindra Bank, alongside non-bank lenders and automaker captive financiers like Mercedes-Benz and BMW, are observing a significant uptick in luxury car financing. While overall outstanding bank loans for personal vehicle purchases reached US$ 69.9 billion (Rs. 5.8 lakh crore) by the end of December, specific luxury vehicle financing data is unavailable. Nevertheless, industry insiders note that luxury car financing is emerging as a rapidly growing segment within lenders' broader car loan portfolios.

The shift in consumer behavior, particularly among wealthier and higher-middle-class individuals, is evident since the COVID-19 pandemic. This demographic is increasingly inclined to invest in luxury vehicles, driven by rising income levels among young Indians and the availability of the latest models from global luxury car manufacturers. Many of these customers opt for loans to realize their aspiration of owning a luxury vehicle. Estimates from Jato Dynamics, an automotive industry intelligence firm, reveal that approximately 60-73% of the cost of purchasing vehicles from luxury brands is financed through loans, with an average loan amount ranging from US$ 48,200 (Rs. 40 lakh) to US$ 87,965 (Rs. 73 lakh).

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.