Car Loan Interest Rates 2025
Car loans can be availed at attractive interest rates starting from 7.80% p.a. Depending on the lender, up to 100% of the on-road price of the car may be provided as a loan.
Certain lenders offer car loans with a repayment tenure of up to eight years. The process to apply for a car loan is simple and can be completed both online and offline.
Car Loan Interest Rate Comparison for All Banks
Name of the Bank | Interest Rate (p.a.) | EMI for Rs.1 lakh for 7 years |
8.90% p.a. onwards | Rs.1,601 onwards | |
7.80% p.a. onwards | Rs.1,551 onwards | |
| Contact the bank | |
8.05% p.a. onwards | Rs.1,561 onwards | |
9.40% p.a. onwards (Rack Interest) | Rs.1,629 onwards | |
9.15% p.a. onwards | Rs.1,617 onwards | |
8.55% p.a. onwards | Rs.1,586 onwards | |
8.75% p.a. onwards | Rs.1,596 onwards | |
|
| |
Contact the bank | Contact the bank | |
9.05% p.a. onwards | Rs.1,611 onwards | |
10.50% p.a. onwards | Rs.1,686 onwards | |
|
| |
7.80% p.a. onwards | Rs.1,549 onwards | |
8.80% p.a. onwards | Rs.1,599 onwards | |
|
| |
7.85% p.a. onwards | Rs.1,551 onwards |
Types of Car Loan Interest Rates in 2025
When applying for a car loan, it's important to understand the two main types of interest rates—fixed and floating. Each has its pros and cons depending on your financial goals and the market conditions.
What is a Fixed Interest Rate?
A fixed interest rate remains unchanged throughout the loan tenure. Your EMI amount stays constant, helping you plan your monthly budget with ease. Fixed rates are ideal if you expect interest rates to rise or prefer predictable payments.
What is a Floating Interest Rate?
A floating interest rate fluctuates based on changes in the market, especially the Marginal Cost of Funds Based Lending Rate (MCLR) or the base rate. When market rates rise, your EMI increases. However, if rates fall, your EMI reduces, resulting in long-term savings.
Fixed vs Floating Car Loan Interest Rates: Key Differences
Here is a quick comparison of fixed and floating car loan interest rates:
Fixed Interest Rate | Floating Interest Rate |
Generally higher rate | Generally lower rate |
EMIs remain constant | EMIs change as per market rates |
Offers lower financial risk | Involves higher market-linked risk |
Helps plan monthly budgets better | Budgeting is difficult due to rate fluctuations |
Suitable for short tenures (3–10 years) | Ideal for longer tenures (20–30 years) |
Provides financial security | Offers potential savings when rates fall |
When Should You Choose a Fixed Rate?
Fixed rates are best when the market is uncertain or expected to rise. If you prefer stability and want to avoid surprises in your EMI, fixed interest rates are a safer choice. They offer peace of mind, especially during volatile market conditions.
When Should You Choose a Floating Rate?
Floating rates are ideal if you expect market interest rates to decline over time. These rates usually start lower than fixed rates, and you stand to save more if the base rate or MCLR drops. However, this option is better suited for borrowers who can handle fluctuating EMIs and have a flexible monthly budget.
Factors That Influence Car Loan Interest Rates
Car loan interest rates vary based on several key factors:
- Credit Score: Higher scores often mean lower rates.
- Income & Job Stability: Stable income improves your chances of better rates.
- Loan Amount & Tenure: Shorter tenures usually attract lower rates.
- Type of Car: New car loans have lower rates than used ones.
- Down Payment: A higher upfront payment can reduce your interest rate.
- Bank Relationship: Existing customers may get special offers.
- Market Trends: RBI policies and repo rate changes impact lending rates.
Used Car Loan
Lenders have different interest rates set for used car loans which depend on a lot of factors such as the age of the vehicle, loan tenure, etc. Get to know more about Pre-owned auto loans.
- Credit Score - If you have a credit score of above 750, lenders are likely to offer you a car loan at a low interest rate. This is because a healthy credit score gives an indication to the lender that lending to you is less risky since you have been sincere about your past repayments as indicated by your score.
So, if you want a lower interest rate on your car loan, it is a good idea to keep your credit score at healthy levels. Having a good credit score may also fetch you additional benefits such as quick approvals, pre-approved offers, etc. - Repayment Tenure - The repayment tenure you choose for your car loan will impact your interest rate. If you choose a longer tenure, your EMIs will be lower but you will be paying higher interest over the loan tenure.
On the other hand, if you choose a shorter tenure, though the EMIs will be higher, you will be able to clear the loan sooner. Lenders will typically charge a lower interest rate on the car loan if you choose a shorter tenure simply for the fact that the loan will be cleared faster. - Loan Amount - The amount of car loan that you avail will affect the interest rate charged on your car loan. If you opt for a higher loan amount, you may get a lower interest rate and vice versa. This will, however, vary from lender to lender.
- Relationship with the lender - Lenders with whom you have a good relationship, in terms of payments and other transactions, may offer car loans at lower interest rates. Hence, before you approach other lenders for car loans, ensure that you check the interest rates offered by your existing lender.
- Income - If your income is on the higher side, you may enjoy the benefit of a lower interest rate as a higher income indicates higher repayment capacity.
The repayment tenure you choose for your car loan will impact your interest rate. If you choose a longer tenure, your EMIs will be lower but you will be paying higher interest over the loan tenure.
FAQs on Car Loan Interest Rates
- How can I get a car loan with a lower interest rate?
If you have a high credit score (above 750), make a higher down payment, choose a shorter repayment tenure, and have a steady source of income, you can negotiate with the lenders to offer you a lower interest rate on a car loan. Most lenders will be happy to acknowledge your request. However, before you negotiate with other lenders, make sure you check with your existing lender. As they are already aware of your transaction history, there are high chances of them acknowledging your request.
- Does any lender offer special interest rates on car loans for women borrowers?
Yes. There are some lenders who offer a concession on car loan interest loans for women borrowers.
- Can I negotiate with the lender for lower interest rates on my car loan?
If you have a good credit score, higher income, and a good relationship with the bank, you can negotiate for a lower interest rate on car loans. However, this will solely lie at the discretion of the bank whether to honour the request or not.
- Will the interest rate on car loans be fixed or floating?
Lenders offer both fixed and floating rates of interest on car loans. As the names suggest, fixed interest rates would mean that the interest rate will be fixed throughout the loan tenure, and floating interest rates would mean that the interest rate will vary based on different factors. Before you avail a car loan, check with the lenders what kind of interest rates they offer and pick the one that suits your requirements.
- Will I get a lower interest rate if I make a higher down payment?
If you make a higher down payment, you will need to avail a lesser amount as a car loan. In such cases, you may be able to get a lower interest rate since you will be repaying the loan quicker.
- Does the type of car affect the car loan interest rate?
The interest rate on a car loan is not directly affected by the type of car but may depend on the cost of the car. For example, luxury cars may have a lower interest rate as the amount of loan tends to be higher. Having said that, some lenders may charge a higher interest loan on higher loan amount availed.
- Should I go for a fixed or floating rate of interest?
If you choose a car loan with a fixed interest rate, the interest that you will be paying will remain unchanged throughout the loan tenure. However, if you go for a floating rate of interest, the interest that you will be paying may be higher or lower based on the increase or decrease in the interest rate. A fixed interest rate is recommended if you feel that there are chances of the interest rate increasing in the future and you do not want to take any risks.
- Will my car loan interest rate be lowered if I make a prepayment?
Yes. If you make a prepayment, there are chances that the lender will offer you a lower interest rate because when you make a prepayment, the overall loan amount reduces. However, before you prepay your loan, understand the process completely as there may be some penalty that lenders will charge you. Also, whether you should make a prepayment or not will depend on factors such as the interest rate, stage of loan payment you are at, etc.
- I have a credit score of 700. Will it affect my car loan eligibility or the interest rates I pay on my car loan?
When you apply for a car loan, the first thing that lenders look for is your credit score. Most lenders prefer lending to someone with a credit score above 750. With your score, it may be a bit difficult for you to get a car loan and if you do manage to get one, you may be charged a higher rate of interest.
News about Car Loan Interest Rates
Maruti Suzuki to Launch eVX SUV, Targeting 40 Million Production Units by 2030
Several prominent car manufacturers, including Tata, Mahindra, Hyundai, and Maruti Suzuki, are making significant strides in the Indian electric car market. Maruti Suzuki, the largest car seller in India, is set to launch its first electric vehicle, an SUV named eVX, in the fiscal year 2024-2025. The eVX boasts a 60kWh battery pack, offering an impressive range of up to 550 kilometres. The design, unveiled at the 2023 Auto Expo, features a sporty look with LED headlight units and fog lamps. The company aims to compete with other electric models from Mahindra, MG, and Hyundai. Additionally, Maruti Suzuki has ambitious production targets, planning to reach 40 million units in India by 2030, with investments in the Kharkhoda production project. The project is expected to be operational by 2025, producing 250,000 vehicles annually in its initial phase. The company aims to sell 60% of its targeted 30 lakh vehicles in India, with a focus on CNG, fully electric, biofuel, and flex-fuel models.
Passenger Vehicle Sales Could Be Impacted by an Increase in Auto Loan Interest Rates
Rising auto loan interest rates may affect sales of passenger vehicles (PV) in India if repo rates continue to rise, according to Shashank Srivastava, Senior Executive Officer (Marketing and Sales) at Maruti Suzuki India. This is as the industry gets ready for single-digit growth in 2024. He continued by saying that PV sales could increase by a single-digit percentage in 2024, with a significant baseline of record 41.08 lakh units in 2023. The economy as a whole must grow in order for the auto industry to flourish; a 6% to 6.5% increase in GDP per capita is projected.
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