Car Loan Calculator

A car loan is the most common reason Indian middle-class households take secured credit. Cars are depreciating assets — they lose 15-20% of value in the first year and 50% in five years — so the way you structure the loan matters as much as the rate you negotiate. This car loan calculator helps you size the EMI, the total interest and the all-in cost before you walk into a showroom, where the salesperson's incentive is to maximise the loan size, not your financial wellbeing.

The car loan EMI uses the same reducing-balance formula as every other Indian loan: EMI = P × r × (1+r)^n divided by ((1+r)^n − 1). For new cars, lenders typically offer 80-90% of the on-road price (which includes the ex-showroom price, RTO charges, road tax, insurance and accessories). For used cars, the ratio drops to 60-80% depending on the car's age, with anything older than 5-7 years often refused outright. The interest rate is set by your CIBIL score, income, employment type and the lender. New car loans from public sector banks start around 9.0-9.5% for the best profiles, going up to 11-12% for borderline cases. Used car loans run 12-16%.

Down payment discipline is the single most important habit. A car worth ₹10 lakh on-road becomes worth ₹8.0-8.5 lakh the moment you drive it out of the showroom. If you have taken a 90% loan (₹9 lakh), you immediately owe more than the car is worth, and your effective equity is negative. A 20-25% down payment buffers against this depreciation and protects you in the rare case you need to sell the car within the first year. It also brings down the EMI proportionally.

Tenure is the second discipline. Banks now offer up to 7 years on car loans because it shrinks the EMI to attractive levels, but most cars are not worth keeping for 7 years (especially if you change cars every 4-5 years like the average Indian buyer). A loan that outlasts the car is a recipe for negative equity. A 4-5 year tenure aligned with your typical ownership period is the right default.

Processing fees on car loans are typically 0.5-1.5% with 18% GST. Some lenders advertise zero processing fees but charge a higher rate; do the math on the all-in cost over the full tenure, not just the upfront fee. Cross-selling is also aggressive at the dealership: extended warranty, paint protection, anti-rust treatment, and bundled insurance are all high-margin add-ons. The credit life insurance bundled with the loan is rarely worth the cost; a pure-term life policy of equivalent cover is far cheaper.

Used car loans deserve special caution. The lower price tag is offset by a higher interest rate, shorter tenure cap, and higher maintenance costs that hit your wallet immediately. Run the total-cost-of-ownership math (EMI plus expected service plus insurance plus fuel) before you decide that a used car is automatically the cheaper option.

Finally, prepayment. If your car loan has a 2-3% prepayment charge and the rate is 10%, prepaying using surplus cash usually beats the alternative of letting that cash sit in a savings account at 3-4% post-tax. But prepayment is not always optimal — if you have a higher-interest personal loan or credit card debt, clear that first.