Car Loan EMI Calculator
Your car loan EMI and total interest, and the real interest rate behind a dealer's 'flat rate' offer.
A ₹7 lakh car loan at 9% for 5 years costs ₹14,531 a month and ₹1,71,851 of interest. A dealer's '5% flat' for 5 years is really about 9.2% a year on the reducing balance.
The words on this page, explained simply
New to this? Here is what each term means, in plain English.
- EMI (equated monthly instalment)
- The same amount you pay the lender every month until the loan is repaid. Each EMI pays that month's interest first; the rest reduces what you owe.
- Principal
- The amount you borrowed, or the part of it you still owe. Interest is charged on this.
- Tenure
- How long you take to repay the loan. A longer tenure means a smaller EMI but much more interest in total.
- Reducing balance
- Interest charged only on what you still owe, which shrinks every month. Banks quote home, car and personal loan rates this way.
- Flat rate
- Interest charged on the full loan for the whole term, even after you have repaid part of it. A 5% flat rate over 5 years costs about the same as 9.2% on a reducing balance.
- Repayment schedule
- The year-by-year split of your EMIs into interest and principal, and what you still owe after each year.
Car loans usually run 3 to 7 years, often for up to 90% of the on-road price. Banks quote a reducing-balance rate, like any EMI loan. Some dealers and finance companies quote a flat rate instead, which looks much lower than it is.
How EMI is calculated
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r is the yearly rate ÷ 12 (as a decimal) and n is the number of months. Banks charge interest on the balance still owed (reducing balance), so in the early years most of each EMI is interest; by the end it is almost all principal.
Flat rate vs reducing-balance rate
A flat rate charges interest on the full loan for the whole term, even as you repay it. ₹5 lakh at 5% flat for 5 years is ₹1.25 lakh of interest, so the EMI is ₹6 lakh ÷ 60 = ₹10,000. The reducing-balance rate with the same EMI is about 9.2%. Use the converter under the calculator to check any offer.
| Flat rate | 3 years | 5 years | 7 years |
|---|---|---|---|
| 4% | 7.5% | 7.4% | 7.3% |
| 5% | 9.3% | 9.2% | 9.0% |
| 6% | 11.1% | 10.8% | 10.6% |
| 7% | 12.8% | 12.5% | 12.2% |
Key takeaways
- The real rate is roughly 1.7 to 1.9 times the flat rate a dealer quotes.
- Compare loans by the reducing-balance rate (or EMI and total paid), never by a flat rate.
- Ask for processing and documentation fees: they raise the true cost.
Frequently asked questions
What is the EMI on a ₹7 lakh car loan?
At 9% a year: ₹22,260 for 3 years, ₹14,531 for 5 years and ₹11,262 for 7 years.
What is a flat interest rate?
Interest charged on the full loan amount for the whole tenure, even though you repay part of it every month. It understates the real cost.
How do I convert a flat rate to a reducing rate?
Find the reducing-balance rate that gives the same EMI. 5% flat for 5 years is about 9.2% reducing; the converter on this page does it for any offer.