Top 10 Vehicle Finance Companies In India

Looking to buy a car but need financial assistance? This article explores India's top 10 vehicle finance companies, offering the best interest rates and flexible loan financing options.  

Vehicle finance involves borrowing money to purchase a car or other vehicle. Rather than paying the full price upfront, borrowers can take out a loan and repay it in manageable monthly installments. This approach makes buying a vehicle more affordable by spreading the cost over time. Vehicle finance is available through banks, credit unions, and specialised finance companies.

India’s vehicle finance market is booming with a current loan portfolio of USD 59.7 billion, the industry is set to grow at 5% annually in the coming years. The COVID-19 pandemic changed how people get around, leading many to prefer personal vehicles over public transport or ride-sharing. This shift has helped the auto finance sector recover strongly, as more consumers seek car loans.

Why are vehicle finance companies in India growing fast?

The Indian vehicle finance market has seen tremendous growth over the past decades. The shift from viewing cars as a status symbol to a necessity has driven the demand for auto loans. With BS-VI regulations and rising new car costs, used car financing is becoming more attractive to consumers. Financial institutions are adapting to these trends, offering competitive rates and flexible loan options to meet the diverse needs of customers.

Major consumers across the country are facing financial issues due to the pandemic surge in the selling of newer cars, which is likely to witness major growth in the market. The Indian used car financing market was valued at USD 7.95 billion and is projected to grow to USD 14.87 billion at a CAGR of around 11% during the forecast period (2022-2027).

The automotive industry has witnessed exponential growth since its inception. Consumers are looking at used cars even more than before, and some are even preferring them over two-wheelers. The majority of customers opt to purchase an automobile depending on some type of financial assistance. The current rate of financing for used cars is around 13-15%, offering a tremendous opportunity for manufacturers and financial institutions alike. Currently, the used car industry is around 1.3 times the new car industry in India, creating significant opportunities for the market. 

Tips for choosing the best vehicle loan 

When selecting an auto loan, consider factors such as interest rates, repayment terms, and additional benefits like insurance coverage. Here are some essential tips to help you select the best auto loan for your needs:

• Compare Interest Rates- Interest rates can vary significantly between lenders. Shop around and compare rates from different banks and financial institutions to find the most competitive option. Even a small difference in interest rates can save you a considerable amount over the life of the loan.
• Understand the Loan Terms- Loan terms, including the length of the loan and repayment schedule, can impact your monthly payments and total interest paid. While longer loan terms may lower your monthly payments, they can also result in higher overall interest costs. Choose a term that balances manageable payments with a reasonable interest rate.
• Check for Additional Fees- Be aware of any additional fees associated with the loan, such as processing fees, prepayment penalties, or late payment charges. These can add up and affect the total cost of your loan. Look for lenders who offer transparent terms without hidden fees.
• Consider Your Down Payment- A larger down payment can reduce the amount you need to finance, which can lower your monthly payments and overall interest costs. If possible, save up for a substantial down payment to reduce your loan amount and secure better loan terms.
• Evaluate Your Credit Score- Your credit score plays a crucial role in determining your eligibility for a loan and the interest rate you will be offered. Check your credit report and address any issues before applying for an auto loan. A higher credit score can help you qualify for better rates and terms.
• Understand Fixed vs. Variable Rates- Auto loans can come with fixed or variable interest rates. Fixed rates remain constant throughout the loan term, providing predictable payments. Variable rates, however, can fluctuate based on market conditions, potentially leading to higher payments over time. Consider your financial stability and preference for risk when choosing between these options.
• Consult Financial Experts- If you're unsure about any aspect of the loan process, consider consulting with a financial advisor. They can provide guidance based on your financial situation and help you make an informed decision.

Top 10 Vehicle Finance Companies in India

Understanding the need for vehicle financing, Vehicle Finance Companies in India offer competitive loan products to consumers. Below is an in-depth look at the top 10 vehicle finance companies in India:

State Bank of India (SBI)

State Bank of India (SBI), founded in 1955 and headquartered in Mumbai, is a leading name in vehicle financing across India. As the country's largest public sector bank, SBI is known for offering competitive interest rates and flexible repayment options for both new and used cars. The bank's annual interest rates start at 8.65%, with a processing fee of ?1,000 for new car loans, ensuring both affordability and transparency. SBI's extensive network of over 12,150 branches and its advanced digital platforms make it easy for customers to access vehicle financing. In the first quarter of FY25, SBI reported a slight 1% increase in net profit, reaching ?17,035.16 crore, up from ?16,884.29 crore a year earlier. SBI’s strong market presence and recent partnership with General Motors underscore its commitment to providing reliable and competitive car financing solutions while supporting customers with a broad range of financial services.

HDFC Bank

HDFC Bank stands out in India’s auto finance sector with its rapid loan processing and flexible repayment plans. The bank offers competitive rates, with a rack interest rate of 8.95% for vehicle loans. HDFC Bank’s extensive branch network and advanced digital tools ensure smooth loan applications and approvals. For new car purchases, it charges a processing fee of 0.50% of the loan amount, ranging from ?3,500 to ?8,000. With a commitment to affordability and customer satisfaction, HDFC Bank supports a wide range of automotive needs, from personal vehicles to fleet expansions.

ICICI Bank

ICICI Bank is a major player in India’s auto finance sector, offering a range of vehicle loan options for both individuals and businesses. The bank simplifies car financing with flexible terms and competitive interest rates starting from around 8.70%. ICICI Bank is known for its transparent processing fees and quick loan approvals, thanks to its advanced digital systems. In the financial year 2023, ICICI Bank reported a 4.3% increase in net profit, reaching ?1,516 crore, up from ?1,454 crore in the previous year. Despite facing stiff competition, ICICI Bank continues to be a top choice for vehicle financing due to its customer-focused service and solid financial performance.

Bajaj Auto Finance Limited (BAFL)

Bajaj Auto Finance Limited (BAFL) is offering a wide range of financial products, including two-wheeler and consumer durable loans. Known for its extensive network of 50 branches and over 6,000 dealerships, BAFL ensures comprehensive coverage and accessibility. The company provides attractive car loan options and free personal accident insurance.  Despite a slight decline in net profit, which fell by 8.43% to ?867.70 crore for the year ending March 2024 compared to ?947.53 crore in the previous year, KMPL remains a significant name in auto loans. The company is known for its flexible loan schemes and efficient processing, which have made it a popular choice among car buyers. 

Kotak Mahindra Prime Limited (KMPL)

Kotak Mahindra Prime Limited (KMPL) is well-regarded in the Indian auto finance market for its flexible schemes and efficient service. KMPL provides financing for both new and used cars with hassle-free documentation and quick processing. The company focuses on delivering customised loan solutions to meet diverse customer needs. In the financial year 2008-09, KMPL reported a profit of ?1,570 million, reflecting its strong position in the market and commitment to providing accessible and reliable vehicle financing options.

Sundaram Finance

Sundaram Finance is offering loans for all types of cars. Established in 1998, the company provides various financing options to meet diverse customer needs. Sundaram Finance Ltd. reported a 9% increase in its standalone net profit for the June quarter, reaching ?308 crore. This growth compared to the same period last year highlights the company's solid performance in the vehicle finance sector. Known for its extensive network and diverse loan offerings, Sundaram Finance continues to be a prominent player in the Indian auto finance market, offering reliable and flexible financing solutions for a wide range of vehicles.

Bank of Baroda

Bank of Baroda provides tailored loan solutions for both individuals and businesses in India's vehicle financing sector. In the fiscal year 2024, the bank reported a notable net profit of ?17,789 crore, reflecting a 26.1% increase from ?14,110 crore in the previous year. The bank's total income grew by 8.1%, reaching ?44,722 crore. Known for its customer-focused approach, Bank of Baroda offers competitive vehicle loan options with flexible terms. Its strong financial performance and commitment to customer service continue to make it a preferred choice for car financing in India.

Punjab National Bank (PNB)

Punjab National Bank (PNB) is a prominent player in the Indian auto finance market. With a reputation for offering competitive car loan options, PNB caters to both new and used vehicles. In the June 2024 quarter, PNB achieved a significant 159% increase in net profit, reaching ?3,252 crore. This boost was supported by a 10% rise in net interest income and a 12.5% increase in total income. The bank also improved its gross non-performing assets (GNPA) ratio to 4.98% and saw a decline in net non-performing assets (NNPA). Additionally, PNB's global business and deposits demonstrated strong growth, underscoring its solid financial health and commitment to customer satisfaction.

Citibank

Citibank, a major player in auto financing, has recently reported strong second-quarter results, surpassing analysts' expectations. The bank's revenue increased by 4% to $20.1 billion, driven by growth in both banking and trading sectors, with equities trading revenue up by 37% due to gains in derivatives. Despite being a former vehicle financing leader, Citibank continues offering a wide range of automobile finance options through its extensive dealership network. Known for its competitive interest rates and customised loan products, Citibank remains a dependable choice for car financing, providing valuable solutions for customers looking to purchase vehicles.

Canara Bank

Canara Bank is known for its attractive interest rates and customer-friendly loan policies. Recently, the bank reported a 10.5% increase in standalone net profit for Q1FY25, reaching ?3,905 crore, in line with analyst expectations. To strengthen its position in the auto finance market, Canara Bank has lowered its interest rates, making its vehicle financing options even more competitive. With annual interest rates starting at 8.80% and a transparent processing fee between ?1,000 and ?5,000, based on the loan amount, Canara Bank remains committed to offering affordable and accessible car loans. Their focus on customer satisfaction is reflected in their approachable and flexible loan solutions.