A ₹10 lakh car with ₹2 lakh down and a ₹50,000 trade-in, financed at 9.5% for 5 years, has an EMI of about ₹15,751. That is ₹1.95 lakh of interest on a ₹7.5 lakh loan, and ₹11.95 lakh in all.
What this calculates
Enter the car's price, your down payment and trade-in, the interest rate and the term. This works out how much you borrow, your monthly EMI, the total interest and the full cost of the car, with a year-by-year table showing how each year's payments split between principal and interest.
The formula
Loan
loan = price − down payment − trade-inEMI
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)Total cost
total cost = down payment + trade-in + EMI × nP is the loan, r the monthly rate (the yearly rate ÷ 12 ÷ 100) and n the number of months. At a 0% rate the loan is simply split evenly across the months.
Worked example
When to use it, and the mistakes to avoid
Use it before you visit a showroom, to see what a car costs per month, to compare terms and rates, or to decide how much down payment to make.
The mistakes that cost the most:
- Looking only at the EMI. A long term makes the EMI small and the interest large.
- Forgetting the other costs. Insurance, registration, fuel and servicing come on top.
- Accepting a low trade-in value. It raises the loan just as a smaller down payment would.
- Not comparing rates. A point or two on the rate is thousands over the term.
- Stretching the budget. Many people keep the EMI under about a fifth of monthly income.
FAQ
How is a car loan EMI calculated?
The lender takes the amount you borrow, which is the price less your down payment and trade-in, and spreads it over the term at the monthly interest rate: EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1). Every EMI is the same, but early ones are mostly interest and later ones mostly principal.
How much down payment should I make on a car?
A bigger down payment means a smaller loan, a lower EMI and less interest. Many lenders ask for 10% to 20%. Putting down more also helps you avoid owing more than the car is worth if its value falls quickly.
Is a longer car loan better?
A longer term lowers the EMI but raises the total interest, often by a lot. For a ₹7.5 lakh loan at 9.5%, 5 years costs about ₹1.95 lakh in interest; 7 years costs about ₹2.80 lakh. Choose the shortest term whose EMI you can comfortably pay.
How does a trade-in change the loan?
The trade-in value is taken off the price just like a down payment, so you borrow less. Check that the dealer gives a fair value for your old car, as a low one raises the loan.
What does the EMI not include?
Insurance, registration and road tax, fuel, servicing, and any processing or documentation fee. Some of these may be financed or paid up front, so add them to your budget separately.