Quick answer
A ₹8 lakh car loan at 9% for 5 years has an EMI of ₹16,607, with ₹1,96,401 in total interest. Choosing 7 years lowers the EMI to ₹12,871 but adds about ₹84,785 more interest, on a car that loses value every year.
Key takeaways
- Follow the 20/4/10 rule: at least 20% down payment, at most 4 years, and all car costs under 10% of income.
- Used-car loans usually cost 2–5% more than new-car loans.
- Check the foreclosure charges: fixed-rate car loans can carry prepayment penalties.
Car loan EMI formula
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]- P = loan amount
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = tenure in months
Frequently asked questions
What is the EMI for a ₹5 lakh car loan?
At 9% a year: ₹15,900 for 3 years, ₹10,379 for 5 years, ₹8,045 for 7 years.
What is the best tenure for a car loan?
3–5 years. Longer tenures lower the EMI, but the car may be worth less than the loan balance for years.
Is EMI calculated on reducing balance?
Yes. Banks and NBFCs in India charge interest on the outstanding balance. Early EMIs are mostly interest, and later EMIs are mostly principal. The amortisation table above shows this split.
Does a longer tenure reduce EMI?
Yes, but you pay much more interest in total. A shorter tenure with a slightly higher EMI can save lakhs of rupees.
Sources & methodology
Formulas follow the standard methods used by Indian banks, fund houses and government schemes. Rates and tax rules were checked against official sources on 1 October 2026. Read our methodology.
This calculator gives an estimate for planning purposes. Actual returns, tax and eligibility depend on your situation and on product terms. It is not financial advice.