Car loan EMI calculator
EMI for a new or used car loan over 1 to 7 years, the interest a longer tenure adds, and how to read a dealer's finance quote against the bank's rate.
Type the amount you are borrowing, the rate and the tenure.
How the EMI is worked out
A car loan is a reducing-balance loan like any other; the formula and its explanation are on the general EMI calculator. What is specific to cars is the tenure range, one to seven years, and the fact that the thing you are borrowing against loses a third of its value in the first few years, which is why lenders keep a margin: they lend a percentage of the on-road (or sometimes ex-showroom) price and you pay the rest up front. Enter the loan amount, not the price of the car.
Worked example: five years or seven
Rs 8,00,000 at 9%. Over 5 years the EMI is Rs 16,607 and the total interest Rs 1,96,401. Over 7 years the EMI drops to Rs 12,871 but the interest rises to Rs 2,81,186, about Rs 85,000 more for the lower instalment. Seven-year loans also run past the point where many owners want to change the car, and a car sold while the loan is open has to clear the outstanding balance first, which in the early years is most of the loan.
Dealer finance and bank finance
- Get the bank's quote before you walk into the showroom. A pre-approved loan from your own bank is a rate you can hold the dealer's finance desk against; sometimes the dealer's tie-up beats it, often it does not.
- Read the quote as a rate, not an EMI. Dealers talk in monthly amounts; type their EMI, amount and tenure here and adjust the rate until it matches to find the true rate. If the quote says "flat rate", the true reducing rate is nearly double it.
- Used cars carry higher rates and shorter tenures, and the loan amount is capped by the lender's valuation, not the price you agreed.
- Processing fee, stamp duty on the agreement, and insurance sold with the loan are outside the EMI. Ask for the total cost of credit in writing.
- Prepayment and foreclosure charges vary by lender and by whether the rate is fixed or floating; most car loans are fixed. Check the clause before planning to close early.
Before you borrow
The EMI is the smallest of the running costs to check. Fuel, insurance, service, parking and the loss of value on resale each cost as much again over the years of the loan. A rule many people use is that all car costs together should stay under a tenth of monthly take-home pay; the calculator gives you the EMI part of that sum.