India's First-Time Car Buyers Are Spending More and Moving Into Higher Segments

First-time car buyers in India are choosing more expensive and better-equipped vehicles than previous generations did, according to observations shared by Kotak Mahindra Prime Ltd., a vehicle financing company.

Buyers in their mid-20s and early 30s are now starting at price points of ₹5 lakh to ₹8 lakh — and in some cases higher — compared to the ₹1.5 lakh to ₹2.5 lakh range that was typical a decade ago. The shift represents roughly a doubling of initial outlay for a first vehicle.

Why First-Time Car Buyers in India Are Moving Into Higher Segments

The change is being attributed to several converging factors: rising incomes, dual-income households, broader manufacturer offerings in the compact SUV and mid-segment categories, and the growing availability of safety, infotainment and connectivity features in vehicles at lower price points than before.

Car Loan Tenure and EMI: How First-Time Buyers Decide What to Afford

For many buyers, the monthly instalment has become the primary affordability metric. Kotak Prime has recorded rising loan ticket sizes for first-car purchases, alongside a growing preference for longer repayment tenures of five to seven years. Within that framework, buyers appear willing to move one or two segments above the entry level if the monthly outgo remains within a range they consider manageable.

Used Cars vs New Entry-Level Cars for First-Time Buyers

The organised pre-owned vehicle market is also shaping first-car decisions. Digital platforms, certified inspections, warranties and transparent pricing have made used compact SUVs and mid-size cars more accessible to buyers who might otherwise have purchased a new entry-level vehicle. In some cases, a used vehicle in a higher segment can be financed at a monthly instalment comparable to that of a new entry-level car.

What Young Urban Buyers Expect From a First Car

The trend reflects wider socio-economic changes in urban India, where young professionals are entering the workforce earlier, household incomes are more likely to include two earners, and the first car is increasingly seen as serving multiple purposes — daily commutes, family use, weekend travel and longer road trips — from the time of purchase.

Manufacturers have responded to this by widening the range of compact SUVs, feature-rich variants and mid-segment options available to buyers at the lower end of the market. Features associated with higher-priced vehicles in earlier years are now part of the consideration set for first-time buyers. Kotak Mahindra Prime Ltd. provides vehicle financing and is a subsidiary of Kotak Mahindra Bank.