Compare tenures from 1 to 8 years to find the right balance between an affordable EMI and the overall cost of the car. A bigger down payment and shorter tenure keep interest costs low.
How car loan EMI is calculated
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P = On-road price − Down payment
- P
- Loan amount after down payment
- r
- Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n
- Tenure in months
Car loans in India usually finance 80 to 90% of the on-road price, which includes ex-showroom price, registration and insurance. The rest is your down payment.
Rates for new cars are generally lower than for used cars, and many lenders offer up to 7 or 8 years for new vehicles.
Buying a car through your business
If the car is used for business, a company, LLP or proprietorship can claim depreciation and the interest on the car loan as business expenses, which reduces taxable profit. Input tax credit on motor vehicles is generally restricted under GST, so plan the purchase with your accountant.