Indian banks gave out more auto loans than home loans in April–June 2025 (the first quarter of FY26)—a first in Indian banking history. This shift shows Indians now prefer car ownership over home buying, with banks increasing focus on vehicle finance.

Key Numbers Behind the Shift

Total new loans (Q1 FY26) growth: Just 1.3%.Home loans outstanding: ₹30.6 lakh crore (16.6% of all bank credit), up 9.6% year-on-year. But quarter-on-quarter growth slowed to 1.9%. Auto loans outstanding: ₹6.52 lakh crore, up 10.8% year-on-year, and a solid 4.7% growth in just this quarter. Auto loans now make up about 3.5% of all bank credit. Market share: Public sector banks have jumped to a 43% share in home loans, the highest in years, while private banks’ share has shrunk.

Why Are Auto Loans Rising Fast?

Car demand is booming, not just in cities, but in tier-2 and tier-3 towns as well. Loan tenures are longer (6–7 years), making it easier for people to buy bigger or better cars, especially SUVs. Digital lending and instant approvals from banks/NBFCs have made getting a loan for a car very easy. Interest rates are competitive, and RBI’s earlier rate cuts made loans cheaper for everyone.

What About Home Loans?   

Growth in home loans is slowing. While values are high, new home loan origination growth fell to just 2.7% in FY25, much lower than before.      Public sector banks now dominate new home loans, up to 43% share, but even this has not kept growth robust. Major private lenders are cautious, slowing the overall market.            

Reasons for slowdown in Home Loans

High property prices, macroeconomic uncertainties, and tighter lending. Highly inflated property prices. Middle class families are awaiting for change in real estate cycle to buy properties at reasonable prices. Currently, real estate prices in India are at high levels of its time.         

What This Means for India’s Auto Market

More Indians choosing cars, consumers are spending on mobility more than ever before. Finance made easy, banks and NBFCs now finance used cars and commercial vehicles, reaching smaller cities as well. Digital transformation, most auto loans are processed digitally. Use of EMI calculators, apps, and instant approvals is now common.

Smart tips for borrowers

• Compare rates from different banks/NBFCs.          
• Use an EMI calculator to plan budget.         
• Longer loans mean smaller monthly payments but higher total interest.             
• Risks to Keep in Mind              
• More borrowing means higher risk of defaults. Delinquencies remain low for now but can rise if people over-borrow. 
• Longer loan terms can lead to negative equity—if your car’s value drops below your loan balance.    
• Budget before borrowing and never miss payments.         

How Banks Are Responding

Public sector banks lead growth in both auto and home loans, outpacing private banks since FY25. Banks are expanding into used car finance and lending more in smaller towns.

Digitalization: Fast approvals, digital processing, and fintech collaborations make loans more accessible.

Looking Ahead in Indian Market

Auto loan growth will likely continue, especially if interest rates stay low and incomes rise. Experts predict vehicle loans could double in a few years, with India moving rapidly toward a car-owning middle class. Used cars, EVs, and digital lending will be hot trends for the future.

India’s new credit trend signals a lifestyle shift: consumers prefer the freedom and necessity of personal vehicles. For auto blogs, this is major news. Vehicle finance is now a huge growth driver, fueled by tech, rising aspirations, and smart lending. Hope the above content is useful for understanding the change in trend in Auto Loan Vs. Home Loan.

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