Car Loan Interest Rates


Car loan interest rates in India range from approximately 8.45% per annum and differ by lender and borrower profile. As per the RBI (Reserve Bank of India) repo rate reduction to 6.25% in February 2025, several banks have adjusted their lending rates accordingly.

For example, the Bank of Maharashtra offers car loans starting at 8.45% and has waived processing fees to make borrowing more affordable. Borrowers with higher credit scores can easily qualify for better rates.

Keep reading till the end to understand all about car loan interest rates to make the right loan choice.


As of May 2025, car loan interest rates in India typically range from 8.45% per annum and vary depending on the lender, loan amount, and the applicant’s credit profile.

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Table of Contents:

Best Car Loan Interest Rates by Banks

Here are some of the top car loan interest rates offered by some of the top banks of India:

Bank Interest Rate (% per annum)
HDFC Bank From 9.40%
State Bank of India (SBI) 9.20% to 10.15%
Canara Bank From 8.70%
Federal Bank of India 9% to 9.50%
Axis Bank From 9.40%

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Interest rates are subject to change.

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Types of Car Loan Interest Rates

Generally, there are 2 types of car loan interest rates in India - fixed and floating. Let’s have a look at each of them:

Feature Fixed Interest Rate Floating Interest Rate
Meaning Remains unchanged throughout the loan tenure Fluctuates based on benchmarks like the RBI’s repo rate or the bank’s lending rate
EMI Remains the same and offers easy budget planning May increase or decrease during the loan period
Suitability Individuals who prefer stability Borrowers who can manage the result of potential rate cuts

Used Card Loan Interest Rates

Below you will find a list of all the top banks and the respective loan interest rates for pre-owned cars.

Bank Interest Rates (% per annum)
Axis Bank 13.55% to 15.80%
HDFC Bank 14.50% to 17.50%
State Bank of India 11.75% to 15.25%
Federal Bank of India 12% to 14.5%
Canara Bank 7.70% to 10.30%

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Interest rates are subject to change.

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Car Loan Processing Fees

The processing fee for car loans is as follows:

Processing Fee (₹)

Banks New Cars Old/Pre-owned Cars
Axis Bank Up to ₹1500 + GST 1.25% of Loan Amount + GST
HDFC Bank Up to 1% of Loan Amount subject to a minimum of ₹3500 & maximum of ₹9000 No information available
Federal Bank of India From ₹2000 to ₹4,500 ₹3,500 to ₹5,500
ICICI Bank Up to 2% of loan amount + applicable GST Up to 2% of loan amount + applicable GST
State Bank of India ₹750 + GST 1.25% of Loan Amount + GST

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Factors Affecting Car Loan Interest Rates

The car loan interest rates in India are influenced by several key factors such as:

  • Credit Score: A higher credit score, typically above 750, shows responsible financial behavior, leading lenders to offer lower interest rates.
  • Loan Tenure: Shorter loan durations often come with lower interest rates but higher monthly payments, while longer tenures may have higher rates but lower EMIs.
  • Income and Employment Stability: A stable income and consistent employment history demonstrate financial reliability, making lenders more likely to offer favorable interest rates.
  • Vehicle Age and Type: Newer vehicles typically attract lower interest rates than used cars, as lenders consider them less risky.
  • Down Payment: Making a substantial down payment reduces the loan amount, which can result in lower interest rates and total interest paid over the loan term.
  • Debt-to-Income Ratio: A lower ratio suggests better financial health, increasing the chances of securing a loan at a competitive interest rate.
  • Relationship with Lender: Existing customers with a good repayment history may receive preferential interest rates due to established trust.
  • Economic Indicators: Factors such as the Reserve Bank of India's repo rate influence lending rates; a decrease in the repo rate can lead to lower car loan interest rates.

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Car Loan EMI Calculator

₹
%
Monthly EMI ₹86
Principal Amount ₹1,000
Total Interest ₹32
Total Amount ₹1,032.00

Year Month Principal (A) Interest (B) EMI (A+B) Balance Loan Paid to Date (%)

The Car loan EMI calculator by Buddy Loan is an easy-to-use calculator and provides your monthly payment amount in just seconds. With several banks offering car loans at different interest rates, you can immediately calculate the EMIs by yourself via this tool.

All you need to do is simply enter your loan amount, interest rate, and loan tenure. The monthly amount is generated automatically, free of cost.

EMI for Car Loan

Let’s assume the car loan interest rate at 8.60%, as it is the current starting rate in India. Using an online EMI Calculator, here are the loan amounts and the respective EMIs.

Car Loan EMI Calculation

Personal Loan Amount 1 Year 2 Year 3 Year
1 Lakh ₹8,727 ₹4,550 ₹3,161
2 Lakh ₹17,453 ₹9,100 ₹6,323
3 Lakh ₹26,180 ₹13,650 ₹9,484
4 Lakh ₹34,906 ₹18,201 ₹12,646
5 Lakh ₹43,633 ₹22,751 ₹15,807

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Impact of Credit Score on Car Loan Interest Rates

Banks generally use applicants' credit scores to measure their repayment capacity and financial stability.

The higher the credit score, the greater the chances of qualifying for loans at low interest rates. Credit scores can also help determine your creditworthiness and spending behavior. This helps banks to understand whether you fall into the high-risk or low-risk category.

In the case of a low credit score, the interest rates can not only be higher, but the applicant will most likely face loan rejections.

The table below provides an overview of the credit score range and the respective impact on car loan interest rates.

Credit Score Range Impact
Below 600 Very High Risk
600-699 High Risk
700-749 Moderate Risk
750-900 Low Risk

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Frequently Asked Questions

As of May 2025, car loan interest rates in India vary based on the lender and the applicant's credit profile, and the recent RBI update on its repo rate.

A good car loan interest rate in India typically ranges between 7.25% and 9.00% per annum for new cars. Rates below 8% are considered highly competitive and are generally available to borrowers with strong credit scores (750 or above) and stable financial profiles.

Using the EMI formula, for a car loan of ₹10 lakh at an interest rate of 8.5% per annum over a 5-year tenure, the estimated EMI is approximately ₹20,758 per month.

As of May 2025, Canara Bank and Punjab National Bank offer some of the best car loan deals, with interest rates starting around 8.45% per annum. SBI and HDFC Bank also provide competitive options, however, the ideal choice is based on your credit score and loan needs.

For a car loan of ₹5 lakh at an interest rate of 8.5% per annum over a 5-year tenure, the estimated EMI is approximately ₹10,673 per month.

The SBI car loan interest rates range from 9.20% to 10.15%.

As of May 2025, UCO Bank offers one of the lowest car loan interest rates in India, starting at 8.45% per annum, with no processing fees.

As of May 2025, car loan interest rates in India typically range from 8.45% to 14.95% per annum, depending on the lender, loan amount, and the applicant’s credit profile.

For a ₹15 lakh car loan at an interest rate of 8.5% per annum over a 5-year tenure, the estimated EMI is approximately ₹30,000 per month.

Yes, with a monthly salary of ₹25,000, you can be eligible for a car loan in India. Note that the approval rate also depends on factors such as credit score (preferably 700 or above), financial stability, and so on.

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