The past four years have seen the vehicle finance market grow two and a half times, with rising income levels and easy availability of finance driving the demand for cars and rapid economic growth raising the sales of commercial vehicles.

The total outstanding loans are likely to touch Rs 1,10,000 crore at the end of 2006-07 this month, up nearly 27 per cent from Rs 86,870 crore at the end of March 2006.

This robust growth comes despite a steady rise in interest rates, which have crossed the 2002-03 level after hitting single-digit lows in 2004-05. The average quoted rate now is 13 per cent for new car finance, against 12 per cent in 2002-03. For new commercial vehicle finance, the rate is about 11 per cent, against 10.50 per cent in 2002-03.

By the end of this month, banks will account for 65.5 per cent of lending for car and utility vehicle purchases, and 64.34 per cent of the commercial vehicle finance market.

ICICI Bank, the country's second largest bank, accounts for 40 per cent of the car and utility vehicle finance market and 30.58 of commercial vehicle finance. Its market share in car finance and commercial vehicle finance stood at 32.6 per cent and 25.90 per cent, respectively, last year.

The largest bank, State Bank of India, will have a 7.5 per cent share of the car finance market, nearly unchanged from a year earlier, while HDFC Bank is expected to see its market share shrink to 12 per cent from 13.3 per cent last year, according to a research by CRISIL.

The growth momentum in vehicle financing is expected to continue since the impact of rising interest rates is being eased by extending repayment tenures from 40 months in 2004-05 to 50 months.

Nearly 89 per cent of the over 10 lakh new cars sold in 2006-07 were bought through borrowings. The loan-to-value ratio stands at 79 per cent, almost unchanged since 2002-03.

In 2006-07, 81 per cent of the 2,85,552 new utility vehicles and 64 per cent of the 12,48,416 used cars sold were financed through borrowings.

In the commercial vehicle segment, almost all the 3,27,856 CVs sold were financed and 65 per cent of the 51,744 passenger commercial vehicles sold were financed.