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.

Two-wheelers closely linked with how young India studies, works, earns

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.

PV purchasers prefer SUVs, feature-rich vehicles

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.

Gen Z, younger Millennials more visible among first-time car buyers

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.

“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.

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