Planning to buy a car with a ₹10 lakh loan? At the standard car loan rate of 9.25% per annum for a 5-year tenure, your monthly EMI works out to ₹20,880. Over 5 years, you will pay a total of ₹12,52,794 - meaning ₹2,52,794 goes toward interest.
Unlike home loans, car loans are for a depreciating asset. This makes it important to keep the tenure short, the rate competitive and the loan amount as low as possible. This guide covers everything you need to know.
Car loans are sanctioned on the ex-showroom price, not the on-road price. On-road price includes registration, insurance and accessories - typically 10%–15% higher. For a car with ₹11.5 lakh on-road price, with a 15% down payment (₹1.5 lakh), your loan amount is ₹10 lakh. Always calculate on the actual loan amount, not the sticker price.
Car loan tenures typically range from 3 to 7 years. Shorter tenures mean higher EMIs but significantly less interest paid:
| Tenure | Monthly EMI | Total Interest | Total Payment |
|---|---|---|---|
| 3 Years | ₹31,916 | ₹1,48,984 | ₹11,48,984 |
| 5 Years ✦ | ₹20,880 | ₹2,52,794 | ₹12,52,794 |
| 7 Years | ₹16,216 | ₹3,62,164 | ₹13,62,164 |
Key insight: A 7-year tenure saves ₹4,664 per month compared to 3 years, but costs ₹2,13,180 more in total interest. For a depreciating asset like a car, keeping the loan tenure to 5 years or less is advisable.
SBI currently offers car loans starting at 8.85%, HDFC at 9.00% and ICICI Bank at 9.10%. Here is how different rates impact your monthly outgo:
| Interest Rate | Monthly EMI | Total Interest | Total Payment |
|---|---|---|---|
| 8.5% | ₹20,517 | ₹2,30,992 | ₹12,30,992 |
| 9.0% | ₹20,758 | ₹2,45,501 | ₹12,45,501 |
| 9.25% ✦ | ₹20,880 | ₹2,52,794 | ₹12,52,794 |
| 9.5% | ₹21,002 | ₹2,60,112 | ₹12,60,112 |
| 10.0% | ₹21,247 | ₹2,74,823 | ₹12,74,823 |
| 10.5% | ₹21,494 | ₹2,89,634 | ₹12,89,634 |
Getting a rate of 8.5% instead of 10.5% saves ₹977 per month and ₹58,642 in total interest. Always get quotes from at least 3 lenders including your existing bank before finalising.
Planning a different budget? Here is a quick reference for common car loan amounts:
| Loan Amount | Monthly EMI | Total Interest |
|---|---|---|
| ₹5 Lakh | ₹10,440 | ₹1,26,397 |
| ₹8 Lakh | ₹15,660 | ₹1,89,595 |
| ₹10 Lakh ✦ | ₹20,880 | ₹2,52,794 |
| ₹15 Lakh | ₹31,320 | ₹3,79,191 |
| ₹20 Lakh | ₹41,760 | ₹5,05,588 |
Banks offer lower rates to existing salary account holders and those with a good repayment history. SBI account holders often get 0.25%–0.5% off the standard rate.
Maruti, Hyundai and Tata Motors often run zero-interest or low-interest schemes on selected models during festive seasons (Navratri, Diwali). The effective rate can be 1%–2% lower than bank rates on these schemes.
A higher down payment reduces your loan amount, interest outgo and monthly EMI. On a ₹12 lakh car, paying ₹2 lakh down (instead of ₹1.2 lakh) reduces your EMI by ₹1,672/month and saves ₹20,224 in interest.
Longer tenures reduce EMI but cost significantly more in interest - and your car's value depreciates faster than you repay the principal. Aim to repay before the car needs major maintenance (typically after year 5–6).
Processing fees (0.5%–1%), foreclosure charges (2%–3% of outstanding), and mandatory insurance bundling can add ₹15,000–₹30,000 to the true cost of your loan. Always ask for the full list of charges before signing.
Enter your on-road price, down payment and preferred tenure - get your exact monthly EMI instantly.
Calculate Car Loan EMI →The monthly EMI is ₹20,880. Over 5 years you pay a total of ₹12,52,794 including ₹2,52,794 in interest. Use the EMIPlan car loan calculator to instantly check EMIs for any amount or tenure.
A 5-year loan is almost always better for a car. The 7-year option saves ₹4,664 per month but costs ₹2,13,180 more in interest - on an asset that loses 50%+ of its value in 5 years. If the 5-year EMI strains your budget, consider a higher down payment or a less expensive car rather than extending the tenure.
Most banks charge a prepayment penalty of 2%–3% on car loans, unlike home loans where floating rate loans have no penalty. SBI charges 2% on the outstanding amount for foreclosure within the first 3 years. Check your loan agreement before making a lump-sum payment — sometimes the penalty exceeds the interest saved.