How much car loan EMI will I pay?
Car loan EMIs follow the same reducing balance formula as home loans, but the tenure is shorter, usually 3 to 7 years. Example: an ₹8 lakh loan at 9% for 5 years has an EMI of ₹16,607 and total interest of about ₹1.96 lakh. The same loan over 7 years brings the EMI down to ₹12,871 but pushes total interest up to ₹2.81 lakh.
EMI = P × r × (1 + r)^n / [ (1 + r)^n − 1 ] r = yearly rate ÷ 1200, n = months
Car loan interest rates in India (indicative)
| Lender | New car (p.a.) | Used car (p.a.) |
|---|---|---|
| SBI | 8.70% – 9.75% | 11.00% onwards |
| HDFC Bank | 9.00% – 10.50% | 12.00% onwards |
| ICICI Bank | 9.10% – 10.75% | 12.50% onwards |
| Axis Bank | 9.30% – 11.00% | 13.00% onwards |
| Bank of Baroda | 8.75% – 10.00% | 11.50% onwards |
Used car loans cost 2% to 4% more than new car loans and usually have a shorter maximum tenure. Rates also depend on your credit score, the car model and whether you have a salary account with the bank.
Things to check before taking a car loan
- Loan-to-value: banks fund 80% to 100% of the on-road price for new cars and 70% to 80% for used cars. The rest is your down payment.
- Processing fee: usually 0.5% to 1% of the loan amount, sometimes waived during festive offers.
- Prepayment charges: many banks charge 3% to 5% if you close the loan early in the first year or two. Check this if you plan to prepay.
- Total cost: a longer tenure looks cheaper per month but you pay much more interest. A car also loses value fast, so avoid loans longer than 5 years if you can.
- Keep the car EMI within 10% to 15% of your monthly income so it does not crowd out savings.
Frequently asked questions
What is the EMI for a ₹5 lakh car loan?
At 9% for 5 years the EMI is ₹10,379. For 3 years it is ₹15,900 and for 7 years it is ₹8,045. Use the sliders above to check your own rate and tenure.
What is the maximum tenure for a car loan?
Most banks offer up to 7 years for new cars and 5 years for used cars. Some lenders go up to 8 years for premium models.
Can I get a car loan for 100% of the car price?
Some banks offer 100% on-road price funding to existing customers with a good credit history. Most others fund 80% to 90% of the ex-showroom or on-road price.
Is a car loan interest rate fixed or floating?
Car loans in India are generally fixed rate loans, so your EMI stays the same for the full tenure.
Is there any tax benefit on a car loan?
Not for a car used for personal purposes. If the car is used for business or you are self-employed, the interest and depreciation can be claimed as a business expense.
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