Financing the one asset guaranteed to fall
A car loan is ordinary EMI math applied to an extraordinary situation: you pay interest on an asset that sheds value from the moment it leaves the showroom — roughly 15–20% in year one, close to half by year five. ₹8 lakh at 9.5% for 5 years is an EMI of ₹16,801 and about ₹2.08 lakh of interest — on a car that may be worth ₹4-odd lakh by the final EMI. None of this makes a car loan wrong; it makes honest sizing essential.
On-road price is the real loan
The sticker you negotiate is ex-showroom; what you actually pay is on-road — add road tax and registration (6–15% by state and by fuel type), insurance, and the dealer’s accessory bundle. Lenders now finance up to 90–100% of on-road for many models, which sounds generous until you notice it means borrowing the taxes too. A meaningful down payment (20%+) keeps the loan from exceeding the car’s resale value mid-tenure — being “underwater” on a car complicates both insurance claims and an early upgrade.
The 20-4-10 sanity check
A time-tested rule for keeping the car in proportion to the salary: 20% down, 4 years maximum tenure, all vehicle expenses (EMI + fuel + insurance) within 10–15% of take-home. Banks happily stretch tenures to 7 years to shrink the EMI — but a 7-year loan on a depreciating machine means paying interest on a car you may no longer love, and trading it in becomes painful while a balance remains. Shorter tenure, slightly bigger EMI, is nearly always the cheaper story; test both in the calculator and check the fit against your take-home.
Dealer finance: read the rate’s surname
Showroom desks sometimes quote a flat rate — interest computed on the full original amount every year, not the falling balance. A “7% flat” over 5 years costs about the same as ~12.5% reducing-balance — the number every bank and this calculator uses. Always ask “flat or reducing?”, compare the EMI itself, and weigh the zero-interest offers too: they are usually paid for inside the price via foregone discounts and processing fees. If a personal-loan-style top-up is dangled for the down payment, see the personal loan page for what that really costs.