How is car loan EMI calculated?

Car loan EMI uses the same reducing-balance formula as home loans: EMI = P × r × (1+r)^n / ((1+r)^n - 1). This calculator also adds the processing fee (plus 18% GST) and your down payment to show the total cost of the car, and shows total interest paid over the loan tenure.

What is a good tenure for a car loan?

Most financial advisors recommend keeping car loan tenure to 3–5 years. Shorter tenures mean higher EMIs but significantly less total interest. Cars depreciate fast — you do not want to owe more than the car is worth.

Should I pay cash or take a car loan?

If you can invest the cash at returns reliably higher than the car loan interest rate (typically 8–10% for new cars), taking a loan may work out cheaper. However, a car bought for personal use gives no tax benefit on the loan (unlike a home loan under the old regime), and investment returns are not guaranteed, so many prefer paying cash if they can do so without touching their emergency fund.

Does prepaying a car loan save money?

Yes, prepaying reduces the outstanding principal and therefore the interest. But most car loans are fixed-rate, so lenders may charge for it: RBI's ban on prepayment charges covers only floating-rate loans to individuals. For example, HDFC Bank's new-car loans (as of Sep 2026) charge 6% of the principal outstanding for foreclosure in the first year, 5% in the second year and 3% after that (5% for loans taken from 1 December 2025), and allow part-payments only twice over the tenure, up to 25% of the outstanding each time. Check the charges in your loan's Key Facts Statement and compare them with the interest you would save.

Car Loan Calculator

Calculate your car loan EMI, total interest payout, and true cost of ownership. A bigger down payment cuts both your EMI and the interest you pay.

Car Price

Down Payment

Annual Interest Rate

Tenure

In years

Processing Fee

% of loan amount (18% GST is added)

Monthly EMI

Total interest
Total vehicle cost

Where your payments go

of what you pay the lender is interest and fees

Principal Interest Fee + GST

Half the loan is repaid by

Year-by-Year Amortization

Year	Principal Paid	Interest Paid	Outstanding Balance

EMI calculated using standard reducing balance method with monthly compounding and a fixed rate. Total vehicle cost includes the processing fee plus 18% GST, but not insurance, registration or prepayment/foreclosure charges. Results are indicative only.

What is a Car Loan Calculator?

A car loan calculator helps you estimate your monthly EMI (Equated Monthly Instalment), total interest paid over the loan tenure, and the true total cost of purchasing a vehicle. By entering the car price, down payment, interest rate, tenure, and processing fee, you get a complete picture of what your car will actually cost, not just the sticker price.

As of Sep 2026, new-car loans in India typically carry interest rates of about 7.6–14% p.a. (SBI 8.40–9.35%, HDFC Bank 7.60–14.00%), depending on the lender, the car and your credit score; used-car loans cost more. The 9% default is only an example. A higher down payment reduces both your EMI and total interest. This calculator also generates a year-by-year amortisation schedule, helping you see how quickly the outstanding loan balance reduces.

Car Loan EMI Formula

Banks in India work out a car loan EMI with the standard reducing-balance formula, which is what this calculator uses:

EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]

P is the loan amount: the car price minus your down payment.
r is the monthly interest rate: the annual rate divided by 12, then by 100. At 9% a year, r = 0.0075.
n is the tenure in months: 5 years is 60 months.

Example with the default inputs: P = ₹8,00,000, r = 0.0075 and n = 60. (1.0075)⁶⁰ is about 1.5657, so EMI = 8,00,000 × 0.0075 × 1.5657 ÷ 0.5657 = ₹16,607 a month. Multiply by 60 months and you repay ₹9,96,401, of which ₹1,96,401 is interest.

Because interest is charged on the outstanding balance, the early EMIs are mostly interest (₹6,000 of the first ₹16,607 here) and the later ones mostly principal. The yearly table above shows that split.

Worked example: ₹10 lakh car with ₹2 lakh down

Illustrative: a ₹10,00,000 car, ₹2,00,000 down payment, 9% interest, 5-year tenure and a 0.5% processing fee. These are the calculator's default inputs, so the numbers above should match.

You borrow ₹8,00,000 and pay an EMI of ₹16,607. Over 5 years that adds ₹1,96,401 of interest, and the fee with 18% GST is ₹4,720. The total cost of the car comes to ₹12,01,121, about ₹2 lakh more than the price.

The decision it informs is tenure. At 3 years the EMI rises to ₹25,440, but interest falls to about ₹1.16 lakh, saving roughly ₹80,000. If the higher EMI fits your budget, the shorter loan is cheaper. Insurance, registration and foreclosure charges are not included.

How to Use This Car Loan Calculator

1
Enter the car price and down payment
Many lenders finance most of the on-road price, and some (for example HDFC Bank) up to 100% on selected models. A 20–25% down payment still makes sense: it lowers your EMI and the total interest.
2
Set the interest rate
Compare rates from banks and NBFCs. New-car rates are roughly 7.6–14% (Sep 2026); used cars get higher rates than new cars. Your CIBIL score (750+ preferred) has a big effect on the rate you are offered.
3
Choose your loan tenure
Most car loans run 1–7 years (some lenders allow longer). A longer tenure means a lower EMI but more total interest; a shorter one costs more each month and less overall. For most buyers, 3–5 years keeps the EMI manageable without piling on interest.
4
Add processing fee
Processing fees vary by lender (HDFC Bank, for example, charges up to 0.5%, minimum ₹3,500 and maximum ₹8,000, plus GST). The calculator adds the fee plus 18% GST to the total vehicle cost, so you see the true cost of ownership beyond EMI × months.

Tips to Reduce Your Car Loan Cost

Maximise Down Payment

Going from 10% to 20% down payment on a ₹10L car (₹1L less borrowed at 9%) saves about ₹25,000 in interest over 5 years, or about ₹35,000 over 7 years.

Improve Your CIBIL Score

A CIBIL score above 750 qualifies you for the lowest interest rates. Pay all bills on time, reduce credit card utilisation, and check for errors in your credit report before applying.

Choose Shorter Tenure

A 3-year loan on ₹8L at 9% costs about ₹1.16L in interest vs about ₹2.81L for a 7-year loan, a saving of about ₹1.65L. If you can afford the higher EMI, the shorter tenure is usually the cheaper choice.

Compare Multiple Lenders

Don't accept the dealer's financier automatically. Compare rates from your bank, other banks, and NBFCs. Even a 0.5% lower rate on a ₹8L loan over 5 years saves ₹11,000–₹15,000.

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