Car loan EMI is calculated using the standard reducing-balance formula on the principal you borrow (on-road price minus down payment). Indian car loan rates are 8-13% in 2026, tenures up to 8 years.
What is Car Loan?
Car loans work like home loans, just smaller and shorter. You borrow a percentage of the on-road price (typically up to 85-90%), pay the rest as down payment, and repay via monthly EMIs over 1-8 years.
Interest rates depend on car type (new vs used), borrower income, CIBIL score, and lender. New car loans are 8-10%; used car loans are 11-13%; commercial vehicles vary widely.
Many manufacturers offer 'low EMI schemes' — these usually shift the cost via processing fees, balloon payments, or higher rates after promotional periods. Always compare apples-to-apples using the EMI calculator on the actual rate and tenure.
Standard EMI formula
- P
- Principal—on-road price minus down payment
- r
- Monthly rate—annual rate / 12 / 100
- n
- Months—tenure × 12
How to use this calculator
Three sliders: loan amount (after down payment), rate, tenure.
Enter loan amount
On-road price minus the down payment you plan to make.
Enter rate
Use the rate from your loan offer.
Set tenure
Most car loans are 3-7 years. Longer tenure lowers EMI but raises total interest.
Car loan scenarios
Comparing offers
Run different rates and tenures from different banks side by side.
Down payment trade-off
Higher down payment = smaller loan = lower EMI. Use the calculator to find your sweet spot.
Used car financing
Used car rates are higher (11-13%). Calculate carefully — sometimes outright purchase is cheaper than financed.
Common mistakes to avoid
Financing the ex-showroom price and forgetting the rest
On-road price runs 10-15% above ex-showroom once RTO, insurance, and accessories are added — and banks may not finance all of it. Budget the gap as extra down payment.
Stretching to a 7-year tenure for a lower EMI
Cars lose ~50% of value by year five, so long tenures leave you owing more than the car is worth. Cap the tenure at 5 years; if the EMI doesn't fit, the car is too expensive.
Comparing loans on EMI instead of total interest
A slightly lower EMI over a longer tenure almost always costs more in total interest. Compare offers on total payout at the same tenure, plus processing fees.
Glossary
- On-road price
- Total cost of the car including ex-showroom price + insurance + RTO charges + accessories.
- Ex-showroom price
- Manufacturer's price excluding insurance, RTO, etc.
- Down payment
- Upfront cash you pay; the rest is financed by the loan.
- Foreclosure penalty
- Some lenders charge 2-5% if you pay off the car loan early. Floating-rate loans cannot have this.