How it's calculated
A car loan is repaid in fixed monthly instalments over a few years. The loan amount is the car's on-road price minus your down payment. Each EMI pays that month's interest on the balance still owed and repays some principal, and the calculator lists every instalment so you can see the outstanding balance at any point, for example if you plan to sell the car before the loan ends.
The formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), with P the amount borrowed, r the yearly rate ÷ 12 and n the number of months. Interest each month = balance × yearly rate ÷ 12. This is the reducing-balance method; a "flat rate" quote that charges interest on the original amount for the whole tenure costs far more for the same headline rate.
Worked example
An ₹8 lakh car loan at 9% for 5 years has an EMI of ₹16,607 and total interest of ₹1,96,401.
| Line | Amount |
|---|---|
| Principal (loan amount) | ₹8,00,000 |
| Total interest | ₹1,96,401 |
| Total amount paid | ₹9,96,401 |
Over 3 years instead, the EMI rises to ₹25,440 but total interest falls to ₹1,15,832. Borrowing ₹6 lakh after a bigger down payment brings the 5-year EMI down to ₹12,455.
Comparing offers
Lenders must give you a Key Facts Statement before you sign, with the interest rate, the EMI, every fee and the annual percentage rate (APR), which includes the fees. Compare offers on APR, not just the rate.Reserve Bank of India Car loans are often fixed-rate, so a prepayment or foreclosure charge may apply; it must be disclosed in the sanction letter and KFS, and the lender cannot add charges that were not disclosed.Reserve Bank of India
Assumptions and limitations
- Reducing-balance interest at a fixed rate for the whole tenure.
- Loan amount only. Insurance, registration, accessories and processing fees are not included unless you add them to the amount you borrow.
- First EMI one month after disbursal; dealer schemes with advance EMIs work differently.