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Enter your loan details to see EMI and total interest
Flat rate in real terms
Figures exclude processing fees, insurance and road tax. Confirm the final schedule with your lender.
Flat Rate vs Reducing Rate: The Number Dealers Do Not Explain
This is the single most expensive misunderstanding in car finance. A flat rate charges interest on the full original loan amount for the whole tenure, even though you are steadily paying the loan down. A reducing rate charges interest only on what you still owe.
Worked comparison: Rs 8 lakh over 5 years
| Item | Flat 7% | Reducing 9.5% |
|---|---|---|
| Loan amount | ₹8,00,000 | ₹8,00,000 |
| Monthly EMI | ₹18,000 | ₹16,801 |
| Total interest | ₹2,80,000 | ₹2,08,089 |
| Total repaid | ₹10,80,000 | ₹10,08,089 |
| True cost of borrowing | about 12.5% reducing | 9.5% reducing |
A headline flat rate of 7% sounds cheaper than 9.5%, but it actually costs about ₹71,900 more over the same five years. Whenever a dealer quotes a rate, ask whether it is flat or reducing before comparing offers.
Quick rule of thumb: on a 5-year loan, a flat rate is roughly 1.8 times the equivalent reducing rate. Always convert before you compare.
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How Tenure Affects Your Car Loan
The table below uses a ₹8 lakh loan at a 9.5% reducing rate.
| Tenure | Monthly EMI | Total Interest | Total Repaid |
|---|---|---|---|
| 3 years | ₹25,626 | ₹1,22,549 | ₹9,22,549 |
| 4 years | ₹20,099 | ₹1,64,728 | ₹9,64,728 |
| 5 years | ₹16,801 | ₹2,08,089 | ₹10,08,089 |
| 7 years | ₹13,075 | ₹2,98,316 | ₹10,98,316 |
Stretching from 3 years to 7 years lowers the EMI by roughly ₹12,551, but nearly triples the interest paid. Because a car loses value far faster than a house, a long tenure also means you can owe more than the car is worth for much of the term.
Down payment matters more than you think
Most lenders finance 80% to 90% of the on-road price. Every extra rupee of down payment reduces the principal, and interest is charged on the principal, so the saving compounds over the full tenure. Enter the on-road price above and the calculator shows your down payment automatically.
New Car vs Used Car Loans
| Feature | New Car Loan | Used Car Loan |
|---|---|---|
| Typical interest rate | Lower | Higher |
| Maximum tenure | Up to 7 years | Usually up to 5 years |
| Financing share | Up to 90% of on-road price | Often 70% to 80% of valuation |
| Approval basis | Invoice value | Lender's own valuation and car age |
Used car lenders also cap the vehicle's age at the end of the loan, so an older car may only qualify for a shorter tenure.
Note: Rates, tenures and financing limits differ between banks and NBFCs and change over time. Use these results for comparison and planning, then confirm the exact terms in writing with your lender.
Frequently Asked Questions
Related Calculators
Planning a property purchase as well? The Home Loan EMI Calculator includes a full amortisation schedule. For personal and education loans, use the general EMI Loan Calculator.