What is a Car Loan EMI?
A car loan EMI is the fixed monthly amount you pay to repay a loan taken to buy a new or used car. Each EMI includes part of the principal and the interest for that month.
Car loans usually run from one to seven or eight years. Lenders typically finance most of the on-road price, and you pay the rest as a down payment.
What is a Car Loan EMI Calculator?
A car loan EMI calculator works out your monthly instalment, the total interest and the total amount payable, based on the loan amount, the rate of interest and the tenure.
Why you should use a Car Loan EMI Calculator?
- Choose the right car: See what EMI each car’s price leads to, so you pick one that fits your budget.
- Decide your down payment: See how paying more upfront lowers both your EMI and the interest you pay.
- Pick a tenure: Compare shorter and longer tenures to balance a comfortable EMI against total interest.
How Does a Car Loan EMI Calculator Work?
The car loan EMI calculator works on the following inputs:
- Loan Amount: The car price minus your down payment.
- Rate of Interest: The yearly rate charged by the lender.
- Loan Tenure: The number of years over which you repay the loan.
The calculator relies on the following formula:
EMI = P × R × (1 + R)^N ÷ ((1 + R)^N − 1)
- P
- Loan Amount (principal)
- R
- Monthly rate of interest (yearly rate ÷ 12 ÷ 100)
- N
- Loan tenure in months
The total amount is the EMI multiplied by the number of months, and the total interest is the total amount minus the loan amount. Lenders may round the EMI and adjust the last instalment, so their figures can differ by a few rupees.
- Interest frequency: Monthly: Interest is charged every month on the balance still owed, so each EMI reduces the interest straight away. Most loans work this way.
- Interest frequency: Yearly: Interest is charged on the balance at the start of each year (annual rest), so your repayments only reduce the interest once a year. This costs a little more.
Formula to Calculate Car Loan EMI with an Example
Consider an example for a better understanding.
- Loan Amount: ₹8,00,000
- Rate of Interest: 9% per annum
- Loan Tenure: 5 years (60 months)
Using the formula:
EMI = 8,00,000 × 0.0075 × (1.0075)^60 ÷ ((1.0075)^60 − 1)
After calculation, the EMI is ₹16,607. Over 60 months you repay about ₹9,96,401, of which about ₹1,96,401 is interest.
Things to keep in mind
- Down payment: A bigger down payment means a smaller loan, a lower EMI and less interest.
- Other costs: Insurance, registration, processing fees and running costs are not part of the EMI, so budget for them separately.
- Flat vs reducing rate: Some car loans are quoted at a flat rate, which costs more than the same reducing rate. Use our Flat vs Reducing Rate calculator to compare.