Car loan interest rates — drive home without overpaying
Starting new-car loan rates from nine lenders, how much to put down, how long to borrow for, and the paperwork after your last EMI — including removing hypothecation from your RC.
- 9 lenders compared
- Updated for the 7 Oct 2026 repo hike
- Independent — no dealer or bank tie-ups
New car loan interest rates from major lenders
Lowest advertised starting rates for new cars. Used car loans are usually priced higher.
| Lender | Starting rate | Max tenure | Funding |
|---|---|---|---|
| Canara Bank | 7.50% (EV 7.45%) | Up to 7 yrs | Up to 90% |
| Union Bank of India | 7.50% | Up to 7 yrs | Up to 90% |
| Bank of Baroda | 7.60% floating | Up to 7 yrs | Up to 90% |
| Punjab National Bank | 7.60% floating | Up to 7 yrs | Up to 90–100% |
| HDFC Bank | 8.15% | Up to 7–8 yrs | Up to 100% of on-road |
| ICICI Bank | 8.35% | Up to 7–8 yrs | Up to 100% |
| State Bank of India | 8.80% | Up to 7 yrs | Up to 90% |
| Axis Bank | 8.95% | Up to 7–8 yrs | Up to 100% |
| Kotak Mahindra Bank | 9.00% | Up to 7 yrs | Up to 90% |
Rates as of 5 Oct 2026 (before the 7 Oct repo hike). Source: lender websites and public sources.
Fixed vs floating car loans
Many private banks offer car loans at a fixed rate: your EMI never changes, but foreclosing early may cost you a fee. Several public sector banks offer floating rates linked to the repo rate, which means today's hike may raise your EMI or tenure at the next reset, but a future cut would lower it.
The big difference is prepayment. Under the RBI's Pre-payment Charges Directions, effective 1 January 2026, lenders cannot charge foreclosure or part-prepayment fees on floating-rate loans to individuals for non-business purposes. Fixed-rate loans may still carry a charge. If you expect a bonus or plan to close the loan early, check the Key Fact Statement and compare the total cost, not just the rate.
The 20/4/10 rule: a sensible guideline
Lenders will often fund 90–100% of a car's price for up to 7–8 years. Being able to borrow that much does not make it a good idea. A popular rule of thumb is 20/4/10:
- 20% down payment, at least.
- 4 years or less of loan tenure.
- 10% or less of monthly income for the EMI and running costs combined.
Illustration: on a car with an on-road price of ₹10 lakh, a 20% down payment leaves an ₹8 lakh loan. At an illustrative 8.5% over 4 years, the EMI is about ₹19,719 and total interest about ₹1,46,495. Stretching to 7 years lowers the EMI to about ₹12,669, but total interest rises to about ₹2,64,212. Meanwhile, the car loses value every year. Treat 20/4/10 as a guideline, not a strict rule. In a city like Dehradun, where many families run one car for hill trips and daily commutes, comfortable EMIs matter more than the biggest car the bank will fund.
Car loan EMI calculator
The calculator starts with an ₹8 lakh loan at an illustrative 8.5% for 5 years. Adjust the amount to match your on-road price minus your down payment, and try 4 years against 7.
For a year-wise schedule, use the full loan EMI calculator.
Loan EMI calculator
Indicative EMI for a reducing-balance loan. Your lender's schedule, fees and rate resets may differ.
What to check on a new or used car loan
On-road vs ex-showroom
The on-road price adds road tax, registration and insurance. Some lenders fund a share of the ex-showroom price only, others up to 100% of on-road. Ask which, as it changes your down payment.
EV rates
Some banks offer a slightly lower rate for electric cars, as the table shows. Also check current state and central EV incentives when you compare total cost.
Used car loans
Expect a higher rate and shorter tenure. The loan is based on the lender's valuation and the car's age, and the car must pass the lender's inspection.
Dealer financing
Dealer desks are convenient, but compare their rate and fees with your own bank. Do not let a "free accessories" offer hide a higher rate.
Insurance
Lenders usually require comprehensive insurance while the loan runs. You are free to compare and buy it yourself; it need not come from the dealer.
Credit score
A score of 750+ helps you get the lower end of a lender's range. See how to improve your CIBIL score.
After your last EMI: removing hypothecation
Until the loan is repaid, your car's registration certificate (RC) shows the lender's interest — called hypothecation. Once the loan is closed, finish the paperwork; otherwise selling the car later becomes difficult.
- Collect the documents. Get the No Objection Certificate (NOC) and Form 35 from the lender, signed and stamped.
- Apply to remove hypothecation. Use the Vahan services on the Parivahan portal or visit your RTO — in Dehradun, the RTO serving your registration. Submit Form 35, the NOC, RC, insurance and ID, and pay the fee.
- Get the updated RC. The new RC will show you as the sole owner without the lender's name.
- Update your insurance. Ask your insurer to remove the lender's name from the policy.
Do this within the validity of the NOC — lenders' NOCs usually carry a validity period.
Getting a car loan in Dehradun
Most lenders in the table have branches in Dehradun, and most car dealerships in the city have finance desks that work with several banks. Getting an in-principle sanction from your own bank before you visit the showroom puts you in a stronger position: you know your rate and limit, and you can compare it with the dealer's financing offer on the spot. Ask for the Key Fact Statement and check the processing fee, documentation charges and any foreclosure fee. If you are buying around the festive season, offers may look attractive, but compare the total cost rather than the headline rate. Remember that rates on new sanctions may move after the 7 Oct 2026 repo hike.
Car loan or personal loan?
A car loan is secured by the car, so it is almost always cheaper than a personal loan. A personal loan only makes sense for something a car loan won't cover, and even then compare the cost carefully. Saving towards a larger down payment through a short-term debt fund or recurring deposit can also reduce how much you borrow. We are happy to help families in Dehradun and across Uttarakhand plan that, from our office at Ghanta Ghar.
Frequently asked questions
Which bank has the lowest car loan interest rate?
See the starting rates in the table above, collected before the 7 Oct 2026 repo hike. Public sector banks generally advertise lower starting rates than private banks, while private banks often fund a higher share of the on-road price. Your actual rate depends on your credit score, income and the car.
Is a fixed or floating car loan better?
A fixed rate keeps your EMI certain, but may carry foreclosure charges. A floating rate can rise or fall with the repo rate, and under RBI rules effective 1 January 2026 it cannot carry prepayment charges for individual, non-business borrowers. If you plan to prepay, floating is often more flexible.
How much down payment should I make on a car?
A common guideline is the 20/4/10 rule: at least 20% down, a loan of no more than 4 years, and total car costs (EMI, fuel, insurance) within about 10% of monthly income. It is a rule of thumb, not a requirement; many lenders fund 90–100%.
Are interest rates lower for electric cars?
Some lenders offer a slightly lower rate for electric vehicles, as the table shows. Check the EV rate, eligible models and any conditions with the lender directly.
Can I get a loan for a used car?
Yes. Most banks and NBFCs offer used car loans, usually at higher rates and shorter tenures than new car loans, with the amount based on the lender's valuation of the car and its age.
How do I remove hypothecation from my RC after closing the loan?
After your last EMI, collect the NOC and Form 35 from the lender. Apply to remove hypothecation through the Parivahan (Vahan) portal or your RTO, such as the Dehradun RTO, and update your insurance policy to remove the lender's name.
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