Car Loan Calculator
Calculate your Car Loan EMI and check total interest payable over the tenure.
Car loans typically range from 1 to 7 years.
Monthly EMI
₹16,801
Principal Amount
₹8,00,000
Total Interest
₹2,08,089
Total Payment
₹10,08,089
How the Car Loan Calculator works
Reviewed by Dinesh Babu · Last updated July 2026
This calculator computes your car loan EMI and total cost from the on-road price, down payment, interest rate and tenure. The loan amount is the price minus your down payment, so a larger down payment directly cuts both the EMI and the total interest.
Car loans use the same reducing-balance EMI formula as any other loan, but they are secured against the car itself and typically run a shorter 3 to 7 years. Rates are usually higher than home loans because the asset depreciates and the tenure is shorter.
The crucial thing to remember is that a car is a depreciating asset — its value falls every year while you are still paying interest on it. That makes very long car-loan tenures a poor idea.
EMI formula
EMI = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1)
P = loan amount (on-road price − down payment), r = monthly rate, n = number of months.
A car is a depreciating asset
Unlike a house, a car loses value the moment you drive it out. Within a few years it can be worth a fraction of its purchase price. Stretching the loan to 7 years to shrink the EMI means you can spend years owing more on the car than it is actually worth — a situation called negative equity.
The sensible approach is the opposite of a home loan: keep the tenure as short as you can comfortably afford, so the loan is cleared before the car has depreciated too far.
Getting the total cost right
- The on-road price already includes RTO, road tax and insurance — borrow against that, not just the ex-showroom price.
- A larger down payment lowers both EMI and total interest and reduces the risk of negative equity.
- Shorter tenures cost more per month but far less in total interest.
- Check for prepayment or foreclosure charges before signing; some lenders levy them on car loans.
A ₹10 lakh car with 20% down
On a ₹10,00,000 on-road car, a ₹2,00,000 down payment leaves an ₹8,00,000 loan. At 9.5% p.a. over 5 years (60 months) the EMI is about ₹16,801 and you pay roughly ₹2.08 lakh in interest over the term.
Why the down payment matters
Doubling the down payment to ₹4,00,000 on the same car cuts the loan to ₹4,00,000. The EMI roughly halves and the total interest falls to about half as well — a bigger down payment is the cleanest way to reduce what a car ultimately costs you.
Common mistakes to avoid
- Choosing a 7-year tenure just to lower the EMI — you pay much more interest on an asset that is losing value.
- Making a tiny down payment, which raises interest and can leave you owing more than the car is worth.
- Financing add-ons and extended warranties into the loan, so you pay interest on them for years.
- Comparing only EMIs across dealers instead of the total interest and any prepayment charges.
Frequently asked questions
How does the down payment affect my car loan?+
It reduces the loan amount directly, lowering both your EMI and total interest. On a ₹10 lakh car, putting ₹4 lakh down instead of ₹2 lakh roughly halves both the EMI and the interest you pay.
What tenure should I pick for a car loan?+
The shortest you can comfortably afford, typically 3 to 5 years. A car depreciates, so long tenures mean paying interest on an asset that keeps losing value — and risk owing more than the car is worth.
Why are car loan rates higher than home loans?+
The tenure is shorter and the asset (the car) depreciates, so lenders carry more risk on the collateral. Car loan rates are therefore usually a few percentage points above home loan rates.
Can I prepay a car loan?+
Usually yes, and prepaying early saves the most interest. But some lenders charge a foreclosure or prepayment fee, so check your agreement before making a lump-sum payment.
Should I borrow against ex-showroom or on-road price?+
Base your loan on the on-road price, which includes registration, road tax and insurance — that is the amount you actually need to fund. This calculator lets you enter the on-road price and your down payment.
Is a car loan a good idea at all?+
It depends on your finances. Because a car is a depreciating asset, the cheapest option is a larger down payment and a short tenure. Borrow only what you need and clear it quickly.