Enter the car’s on-road price, your down payment, the bank’s interest rate, and tenure. The calculator shows your monthly EMI, total interest paid, and the true cost of ownership — which is always more than the sticker price.
Current car loan interest rates (April 2026)
| Lender | New car rate | Used car rate | Notes |
|---|---|---|---|
| SBI | 8.75–9.25% | 11.00–13.00% | Lowest for salaried with 750+ CIBIL |
| HDFC Bank | 9.10–9.60% | 12.00–14.00% | Fast disbursal, wide dealer network |
| ICICI Bank | 9.00–9.50% | 11.50–13.50% | Competitive for pre-approved customers |
| Axis Bank | 9.10–9.70% | 12.00–14.00% | |
| Kotak Mahindra | 9.00–9.50% | 11.50–13.00% | |
| Bank of Baroda | 8.80–9.30% | 11.00–13.00% | Good for PSU bank preference |
| Federal Bank | 9.00–9.50% | 11.50–13.50% |
Used car loans are typically 2–4% higher than new car loans due to collateral depreciation risk.
How LTV (Loan-to-Value) works for car loans
Banks don’t lend 100% of the car’s on-road price. They apply an LTV cap:
- New cars: Up to 85–90% of on-road price
- Used cars: Up to 70–80% of the assessed value (bank’s valuation, not your purchase price)
- On-road price includes: ex-showroom price + road tax + insurance + registration + accessories
So on a ₹10 lakh on-road car, the bank lends ₹8.5–9 lakh. You must bring ₹1–1.5 lakh as a down payment at minimum.
Worked example: ₹8 lakh car, ₹2 lakh down payment, 9%, 5 years
| Metric | Value |
|---|---|
| Loan amount | ₹6,00,000 |
| Monthly EMI | ₹12,447 |
| Total interest over 5 years | ₹1,46,820 |
| Total cost (loan + DP + interest) | ₹9,46,820 |
The ₹8 lakh car costs you ~₹9.47 lakh to own outright. Every year you hold a car loan, the car depreciates faster than the loan balance reduces — particularly in the first 2 years.
Longer vs shorter tenure — the real tradeoff
Same ₹6 lakh loan at 9%:
| Tenure | Monthly EMI | Total interest | You save (vs 7-year) |
|---|---|---|---|
| 3 years | ₹19,069 | ₹86,484 | ₹1,08,336 |
| 5 years | ₹12,447 | ₹1,46,820 | ₹48,000 |
| 7 years | ₹9,634 | ₹1,94,856 | — |
Lower EMI feels affordable but costs ₹1.08 lakh more in interest over 7 vs 3 years. A good rule: don’t extend your car loan beyond 5 years. A car depreciating at 15%/year on a 7-year loan means you’ll be “underwater” (owing more than the car is worth) for the first 3–4 years.
New car vs used car — loan perspective
| Factor | New car | Used car |
|---|---|---|
| Interest rate | 8.75–9.5% | 11–14% |
| Loan tenure | Up to 7 years | Up to 5 years |
| LTV | Up to 90% | Up to 75% |
| Documentation | Simple | Requires RC, insurance history, inspection |
| Depreciation | Sharp first year (15–20%) | Already absorbed by previous owner |
A 2-year-old car at 70% of new price + higher rate often works out similar monthly cost — but the used car is already past peak depreciation. For budget buyers, a well-maintained used car loan frequently offers better value.
Frequently asked questions
Can I prepay my car loan?
Yes. Floating-rate car loans from banks have no prepayment penalty (RBI mandate). Fixed-rate loans may charge 2–5%. Most car loans in India are fixed-rate — check your agreement. A partial prepayment reduces either your EMI or tenure; banks typically reduce tenure by default. Ask for an EMI reduction if that suits you better.
What documents do I need for a car loan?
- KYC: Aadhaar, PAN, passport photo
- Income proof: 3 months salary slips + 6 months bank statement (salaried); 2 years ITR + P&L (self-employed)
- Residence proof: utility bill, rental agreement
- Car proforma invoice (for new car) or RC + inspection certificate (used car)
Does my CIBIL score affect car loan eligibility?
Yes. Below 700: most banks reject or charge 1–1.5% higher rate. 750+: best rates. Even a 0.5% difference on a ₹6 lakh, 5-year loan = ~₹2,000 extra per year = ₹10,000 over tenure. Check and clean up your CIBIL report before applying.
Should I take a car loan or pay cash?
If you can invest the cash at a higher rate than the loan interest (after tax), take the loan. At 9% car loan rate and 30% tax bracket, the effective cost is ~6.3% — below the expected returns on equity MF (11–13% over 5+ years). Mathematically, take the loan. Behaviourally, owning the car outright reduces financial stress — factor both.
Sources
- RBI Master Direction on Loans and Advances (LTV guidelines)
- SBI, HDFC, ICICI, Axis official car loan rate cards (April 2026)
- SEBI Investment Awareness: automobile loan comparison framework