What is the maximum tenure for a car loan?

Most banks offer up to 7 years (84 months) for new cars and up to 5 years for used cars (typically capped to vehicle age + tenure ≤ 8 years).

How much down payment is required for a car loan?

Banks finance 80–90% of on-road price for new cars, so expect a 10–20% down payment. Used car financing typically requires 20–30% down.

Flat rate vs reducing balance — which do car loans use?

Bank car loans use reducing-balance interest (the EMI standard). Some dealer-tied schemes still quote flat rates which are 60–80% more expensive in real terms. Always confirm before signing.

Is car loan interest tax deductible?

No, not for personal use. However, if the car is used for business purposes (and registered accordingly), the interest is deductible as a business expense and depreciation can be claimed.

Car Loan EMI Calculator

Calculate the monthly EMI on a new car, used car or two-wheeler loan. This car loan EMI calculator works for every Indian bank and NBFC.

Typical Rate

8.5% – 15%

p.a. reducing

Max Tenure

7 years

new cars

Financing

80% – 90%

of on-road price

Processing Fee

₹2K – 1%

of loan amount

Car Loan Details

Loan Amount₹8.00 L

Interest Rate9.0% p.a.

Tenure5 yrs

AmountRate %Years

Monthly EMI

₹16,607

for 60 months · 5 years tenure

Principal

₹8.00 L

80.3%

Total Interest

₹1.96 L

19.7%

Total Payment

₹9.96 L

Over full tenure

Avg Interest/Month

₹3.3 K

Across tenure

Principal vs Interest

Distribution of your total payment

Principal Interest

Yearly Breakdown

Principal and interest paid each year (first 15)

Amortization Schedule

Total Principal

₹8,00,000

Total Interest

₹1,96,401

Total Amount Paid

₹9,96,401

Month	Opening Balance	EMI	Principal	Interest	Closing Balance
1	₹8,00,000	₹16,607	₹10,607	₹6,000	₹7,89,393
2	₹7,89,393	₹16,607	₹10,686	₹5,920	₹7,78,707
3	₹7,78,707	₹16,607	₹10,766	₹5,840	₹7,67,941
4	₹7,67,941	₹16,607	₹10,847	₹5,760	₹7,57,094
5	₹7,57,094	₹16,607	₹10,928	₹5,678	₹7,46,165
6	₹7,46,165	₹16,607	₹11,010	₹5,596	₹7,35,155
7	₹7,35,155	₹16,607	₹11,093	₹5,514	₹7,24,062
8	₹7,24,062	₹16,607	₹11,176	₹5,430	₹7,12,885
9	₹7,12,885	₹16,607	₹11,260	₹5,347	₹7,01,625
10	₹7,01,625	₹16,607	₹11,344	₹5,262	₹6,90,281
11	₹6,90,281	₹16,607	₹11,430	₹5,177	₹6,78,851
12	₹6,78,851	₹16,607	₹11,515	₹5,091	₹6,67,336

Frequently Asked Questions

New car loan rates in 2026 range from 8.5% to 11% for prime borrowers at banks. NBFC and dealer-tied financing can go up to 13–15%, especially for used cars or sub-prime credit profiles.

Car Loan EMI Calculator — How to Calculate Vehicle Loan EMI in India (2026)

New Car vs Used Car Loan EMI — Key Differences

The type of vehicle you are financing significantly affects the loan terms available to you. Here is how the three main vehicle categories compare:

New Car

›Banks finance 80–90% of on-road price
›Rates: 8.65–10.25% p.a. (reducing)
›Tenure: up to 7 years
›Lowest rates with best CIBIL score

Used Car

›Typically 60–80% of valuation
›Rates: 10–16% p.a. (reducing)
›Tenure capped: vehicle age + tenure ≤ 8 years
›Rate premium for older vehicles

Two-Wheeler

›Often financed via NBFCs or dealer arms
›Rates: 10.5–17% p.a.
›Flat-rate warning especially applies here
›Compare bank vs dealer offer carefully

The Flat Rate Trap — How Dealers Overcharge

One of the most common and costly mistakes Indian car buyers make is accepting a dealer's financing offer quoted as a “flat rate.” A dealer quoting “8% flat” sounds cheaper than a bank offering “9% reducing balance” — but it is not. Here is why.

In a flat rate scheme, interest is calculated on the original principal for the entire tenure, regardless of how much you have already repaid. The formula is:

Flat Rate EMI = (P + P × R × T) ÷ (T × 12)

For a bank reducing-balance loan, interest accrues only on the outstanding balance — which decreases every month as you repay. The effective reducing-balance rate for “8% flat over 5 years” is approximately 14.5% — nearly double.

Side-by-side example for a ₹8 lakh, 5-year loan:

Bank: 9% Reducing Balance

Monthly EMI: ₹16,607

Total interest: ₹1,96,420

Total paid: ₹9,96,420

Dealer: “8% Flat”

Monthly EMI: ₹17,867

Total interest: ₹2,72,020

Total paid: ₹10,72,020

The dealer's “cheaper” rate costs you ₹76,000 more over 5 years. Always ask: is this a flat rate or a reducing balance rate? If the dealer cannot answer clearly, walk away and go directly to your bank.

Car Loan EMI Calculation Example

Let's work through a realistic new car loan scenario: ₹10 lakh loan at 9.5% for 5 years (60 months).

Monthly rate (r) = 9.5 ÷ 12 ÷ 100 = 0.007917
Number of instalments (n) = 60

EMI = 10,00,000 × 0.007917 × (1.007917)⁶⁰ ÷ ((1.007917)⁶⁰ − 1)

Result: EMI = ₹21,014 per month. Total amount paid over 5 years = ₹21,014 × 60 = ₹12,60,840. Total interest = ₹2,60,840 on a ₹10 lakh loan — a true cost far below what a flat-rate dealer scheme would charge.

Use the calculator above to model your exact vehicle loan. The amortization schedule will show you the outstanding balance after every month — useful for understanding the car's equity position versus the loan balance at any point.

How to Get the Lowest Car Loan Rate

Five proven strategies to minimise the interest rate on your vehicle loan:

Apply directly to your salary-account bank first. Existing relationship customers with salary or savings accounts typically get a 25–50 bps concession over walk-in applicants. Your bank already has your income data and KYC — processing is faster too.
Avoid dealer-tied NBFC financing. Dealerships earn referral commission from their preferred financiers, which is baked into the rate they quote you. Always get a written offer from your bank before setting foot in the dealer's finance office — then negotiate.
Maintain a CIBIL score of 750 or above. Most banks' lowest-bracket car loan rates are reserved for borrowers with CIBIL 750+. Below 700, you may face a 100–200 bps rate premium or outright rejection. Check your score before applying.
Consider a shorter tenure. Some bank products offer a marginal rate discount (10–25 bps) for shorter tenures (3 years vs. 7 years). The EMI will be higher, but the combination of lower rate and fewer months can significantly cut total interest paid.
Compare two or more offers side by side. Use the loan comparison tool to put competing offers on a level playing field — same principal, different rates and tenures — and see the true total cost difference at a glance. Also check the main EMI calculator for a quick cross-product comparison.