What is a Car Loan?
A car loan is a personal secured financing product designed to facilitate the acquisition of
a
new or pre-owned automobile. The bank or financial lender pays the vehicle dealership
directly,
and the borrower repays the disbursed principal alongside interest in regular monthly
installments.
Vehicle loans are hypothecated against the automobile: the registration certificate (RC)
contains a lender endorsement until the final EMI is cleared and a No Objection Certificate
(NOC) is issued. Auto loans usually feature shorter lifespans than mortgages, typically
ranging
from 3 to 7 years.
How to Use the Car Loan Calculator
Structure your vehicle purchase responsibly using four quick steps:
1
Enter Vehicle On-Road Cost
Input total vehicle sticker price including showroom charges, road
tax, and insurance.
2
Subtract Down Payment
Enter your upfront cash deposit to find your net borrowed
financing
requirement.
3
Specify Interest & Tenure
Choose your loan tenure in years and the annual auto financing
rate
quoted by your bank.
4
Verify Monthly Affordability
Confirm that the computed monthly EMI sits safely within 15% of
your
monthly disposable income.
Auto Loan EMI Formula
Car loan installments are structured using the reducing balance monthly amortization formula:
Example Calculation Walkthrough
Suppose you buy a sedan with an on-road price of ₹10,00,000. You pay a
₹2,00,000 (20%) down payment and finance the remaining
₹8,00,000 at 9.0% interest over 5 years (60
months):
- Total Vehicle Cost ₹10,00,000.00
- Down Payment Paid ₹2,00,000.00
- Financed Principal (P) ₹8,00,000.00
- Monthly Rate (r) 9.0% ÷ 12 = 0.75% per month
- Total Number of EMIs (n) 60 months
- Monthly Installment (EMI) ₹16,607.00
- Total Cumulative Interest ₹1,96,420.00
- Total Payout (Principal + Interest) ₹9,96,420.00
