India Used Car Finance Market Booms: Tier-II Cities & Luxury Segment Drive Pre-Owned Sales Surge

MUMBAI, India - Aug. 7, 2025 - PRLog -- India's used car finance market is accelerating rapidly, now outpacing new car sales at a 1.4:1 ratio. According to Makreo Research, this surge is driven by growing consumer demand for certified premium pre-owned vehicles, easier access to flexible financing, and a significant shift in buyer preferences from budget hatchbacks to feature-rich and luxury models.

Shifting Buyer Preferences Toward Premium Vehicles
The used car market is shifting from entry-level to premium vehicles. Luxury cars enter resale within 2 to 3 years, while smaller cars take 5 to 6 years. Entry-level small cars' market share fell from 14% to 3% over five years due to rising prices and regulations. SUVs now comprise nearly 65% of the passenger vehicle market, reflecting growing demand for value-rich, feature-packed models.

Tier-II Cities Emerge as Growth Engines
Tier-II cities like Jaipur, Lucknow, Coimbatore, Kochi, and Chandigarh are driving market growth, with supply on digital platforms like OLX Autos rising 45%, surpassing Tier-I cities. This growth is fueled by rising incomes, better infrastructure, fewer new car dealerships, and growing trust in digital vehicle financing.

Luxury Segment Expands Beyond Metros
Premium brands like Audi, BMW, and Mercedes-Benz are seeing rising demand in non-metro cities. Spinny reports over 30% demand growth in Tier-II cities, led by models such as the Audi Q3 and BMW X1. Loan adoption stands at 58%, with Coimbatore surpassing 65%, reflecting improved access to luxury vehicle financing.

Challenges and Opportunities in an Evolving Market
Despite rapid growth, about 45% of the used car market remains unorganized, facing inconsistent vehicle quality, unclear documentation, and financing challenges. This highlights the need for regulatory reforms and industry innovation to enhance transparency and consumer confidence.

Used car loans typically have Loan-to-Value (LTV) ratios between 70% and 85%, lower than the up-to-100% LTV for new cars, resulting in higher down payments that may deter some buyers. Moreover, with outstanding vehicle loans rising 22% year-over-year to INR 5.09 lakh crore (as of May 2023), effective credit risk management is essential.

Makreo Research's comprehensive report, "India Used Car Finance Market Size and Forecast (2019–2030)," offers detailed segmentation by Lender Type, Loan Tenure, Fuel Type, Vehicle Type, and Geography, covering key players like SBI, Axis Bank, Toyota Financial Services, and others.

Request a sample report here:
https://www.makreo.com/report/india-used-car-finance-market-size-and-forecast-2019-2030