UP leads used-car loan growth at 32.6% CAGR: Where is vehicle credit expanding fastest?

Uttar Pradesh has emerged as the fastest-growing major market for used-car financing, with its portfolio expanding at a 32.6% five-year CAGR through June 2026, according to CRIF High Mark’s latest vehicle-finance report. Karnataka and Telangana followed with growth rates of 31% and 29.7%, respectively.

The sharp expansion highlights the growing role of formal credit in India’s pre-owned vehicle market. However, the pace of growth also brings greater attention to repayment behaviour, particularly as lenders extend financing to a wider pool of borrowers.

UP leads used-car financing growth

Among the major states tracked in the report, Uttar Pradesh recorded the strongest five-year growth in its used-car financing portfolio at 32.6%. The state also remains a significant vehicle-credit market, making its rapid expansion important for lenders assessing regional demand and credit risk.

Karnataka recorded a 31% CAGR in used-car financing over the same period, while Telangana followed closely at 29.7%. The growth in these markets points to increasing consumer acceptance of financing for pre-owned vehicles.

Used-car financing has been the fastest-growing segment within vehicle finance nationally. Its portfolio recorded a 26.2% five-year CAGR between June 2021 and June 2026, while the number of borrowers increased 2.4 times.

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The expansion is also attracting new customers. Around 75% of used-car loan originations came from borrowers who were new to the product, indicating that financing is bringing more consumers into the organised used-vehicle market.

Growth comes with credit-risk questions

The strong growth, however, is accompanied by some signs of emerging stress. Used-car loans recorded PAR 31–90 delinquency of 3.1% nationally. This measures loans where payments are overdue by more than 30 days but less than 90 days and is considered an early indicator of repayment stress.

At the state level, Uttar Pradesh recorded PAR 91–180 delinquency of 1.3%, while Karnataka and Telangana both stood at 1%. The figures suggest that while credit expansion has been rapid in these markets, later-stage delinquency remains relatively contained.

The comparison is particularly relevant because used-car borrowers may have multiple credit obligations. The share of multi-loan used-car borrowers—those with two or more active loans—rose to 6.7% from 4.8% over five years.

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Used-car market deepens beyond metros

The regional data indicates that used-car financing is expanding beyond traditional urban markets. Consumers are increasingly using formal credit to purchase pre-owned vehicles, making financing an important part of the broader used-car ecosystem.

For lenders, the challenge will be to balance this growth with disciplined underwriting. A lower-priced used vehicle does not necessarily translate into lower repayment pressure, particularly when borrowers already have other loans.

The data also shows that rapid portfolio expansion needs to be assessed alongside delinquency trends. As Uttar Pradesh, Karnataka and Telangana continue to see strong growth, lenders will need to monitor whether repayment performance remains stable as the borrower base widens.