Luxury car financing market surges as more Indians trade up
Banks such as HDFC Bank, ICICI Bank, Bank of Baroda, Axis Bank and Kotak Mahindra Bank, as well as non-bank lenders and captive financiers of automakers like Mercedes-Benz and BMW are seeing a sharp spike in luxury-car financing, as consumers increasingly use loans to buy high-end vehicles.
Outstanding bank loans to individuals for purchasing personal vehicles totalled ₹5.8 lakh crore at the end of December. While separate data weren't available on financing of luxury vehicles, executives in the banking and automotive sectors said that was a fast-growing segment of the car loan portfolios for lenders.
The consumer behaviour has changed since Covid, with more wealthy and higher-middle-class Indians now open to splurge on luxury. Increasing income levels of young Indians and the availability of the latest models from the portfolio of global luxury-car makers are also driving demand. Industry executives said many of these customers are taking the loan route to meet the aspiration of owning a luxury vehicle.
As much as 60-73% of the cost of purchasing a vehicle from Lexus, BMW, Mercedes-Benz, Jaguar Land Rover, Audi and Volvo Cars in India is funded through loans, with the average loan amount being ₹40 lakh to ₹73 lakh. For JLR vehicles, the average is ₹73 lakh, while for BMW and Mercedes, it ranges ₹53-55 lakh, according to estimates from Jato Dynamics estimates, an automotive industry intelligence firm. These vehicles cost ₹45 lakh to ₹2.5 crore.
«As the younger population becomes more affluent and
