🚗 Complete Guide to Car Loans in India

What is a Car Loan?

A car loan (also called auto loan or vehicle loan) is a secured loan provided by banks and financial institutions to help you purchase a new or used car. The car itself serves as collateral for the loan. Car loans in India typically cover 80-90% of the vehicle's on-road price, with interest rates ranging from 7% to 14% per annum.

How to Calculate Car Loan EMI

Car loan EMI (Equated Monthly Installment) is calculated using this formula:

EMI = [P × R × (1+R)^N] / [(1+R)^N-1]

Where:

• P = Principal loan amount (Car price - Down payment)
• R = Monthly interest rate (Annual rate ÷ 12 ÷ 100)
• N = Loan tenure in months

Example:

Car Price: ₹12,00,000, Down Payment: ₹3,00,000, Loan Amount: ₹9,00,000

Interest Rate: 9% per annum, Tenure: 5 years (60 months)

Monthly rate (R) = 9 ÷ 12 ÷ 100 = 0.0075

EMI = [9,00,000 × 0.0075 × (1.0075)^60] / [(1.0075)^60 - 1]

EMI = ₹18,702 per month

Frequently Asked Questions

Q: What is the maximum car loan amount I can get?
A: Banks typically finance 80-90% of the on-road price. For a ₹15 lakh car, you can get ₹12-13.5 lakh loan. Maximum depends on your income - EMI shouldn't exceed 40-50% of monthly income.

Q: What is a good car loan interest rate in 2025?
A: 8-9% for new cars is excellent. Rates below 8.5% are considered very good. Above 10% is on the higher side. Used car loans typically cost 1-2% more.

Q: How much car loan can I get on ₹50,000 salary?
A: With ₹50,000 monthly salary, you can afford EMI of ₹15,000-20,000 (30-40% of income). At 9% interest for 5 years, this means a loan of ₹9-12 lakhs.

Q: Is 7-year car loan a good idea?
A: Generally not recommended. While EMI is lower, you pay significantly more interest (30-40% more than 5-year loan). Car value also depreciates faster than loan reduces.