Car Loan EMI Calculator
Car Loan EMI Calculator
The monthly EMI on a car loan from the car’s price, your down payment, the interest rate and the tenure — with the total interest and what the car really costs you once the loan is repaid.
Car loan EMI
A $8,00,000 car, $1,50,000 down, 9.5% for 5 years
Car loan EMI
- P
- the amount borrowed
- r
- the monthly rate: annual reducing-balance rate ÷ 12 ÷ 100
- n
- the number of monthly instalments. In today’s money the EMIs are worth EMI × [1 − (1 + j)−n] ÷ j, where j = (1 + inflation)1/12 − 1.
Worked example
A $8,00,000 car, $1,50,000 down, 9.5% for 5 years
P = 8,00,000 − 1,50,000 = $6,50,000; r = 9.5 ÷ 1200; n = 60
(1 + r)60 = 1.6050
EMI = $13,651
Interest = 13,651 × 60 − 6,50,000 = $1,69,073; the car costs $9,69,073 in all
The same 6,50,000 loan at 9.5%, by tenure
| Tenure | EMI | Total interest |
|---|---|---|
| 3 years | $20,821 | $99,571 |
| 4 years | $16,330 | $1,33,842 |
| 5 years | $13,651 | $1,69,073 |
| 6 years | $11,879 | $2,05,256 |
| 7 years | $10,624 | $2,42,381 |
Flat rate or reducing rate — check before you compare
This calculator, like the EMI calculator, uses a reducing-balance rate: each month’s interest is charged only on what you still owe. Some dealer-arranged car, two-wheeler and consumer loans are quoted instead as a flat rate, where interest is charged on the original amount for the whole tenure. On $6,50,000 over 5 years, a 7% flat rate means interest of 6,50,000 × 7% × 5 = $2,27,500 and an EMI of $14,625; a 7% reducing rate on the same loan costs $1,22,247 in interest, an EMI of $12,871.
So a flat rate is not comparable with a reducing rate — for loans of a few years the reducing rate that charges the same EMI is close to double the flat figure. Working out that equivalent rate needs a trial-and-error solve, which this page does not do. Ask the lender for the reducing-balance rate or the annual percentage rate; RBI’s Key Facts Statement rules require regulated lenders to state an all-in annual percentage rate for retail loans.
Beyond the rate, compare the whole cost: processing fees, insurance bought through the dealer, accessories rolled into the loan, and any charge for closing the loan early. A larger down payment cuts both the EMI and the interest. To see what paying extra later would save, use the loan payoff calculator.
The chart splits each year’s EMIs into principal and interest: $57,187 of the first year’s instalments is interest, $8,127 of the fifth. Inflation softens the later EMIs a little. At 4% a year the 60 instalments are worth about $7,42,548 in today’s money, so the car costs about $8,92,548 in today’s terms against $9,69,073 in cash. That is still more than the $6,50,000 borrowed, because 9.5% is above inflation. And unlike a house, the car loses value over the same years, so inflation is no reason to take a longer loan or a dearer car. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How is car loan EMI calculated?
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1], with P the price less the down payment. A $6,50,000 loan at 9.5% over 5 years is $13,651 a month.
What is a flat interest rate on a car loan?
Interest charged on the full original loan for the whole tenure, even as you repay it. It looks lower than a reducing-balance rate for the same cost, so do not compare the two figures directly.
Is a longer car loan tenure better?
It lowers the EMI but raises the interest: on this loan, 7 years costs $2,42,381 in interest against $99,571 over 3 years.
Does the EMI include insurance and fees?
Only if you add them to the loan amount. Processing fees are usually paid up front and are not in the EMI.
What does “in today’s money” mean for a car loan?
Each EMI is discounted by inflation up to the month it is paid. At 4% inflation the last $13,651 EMI is worth about $11,220 today, and all 60 about $7,42,548 — still more than the $6,50,000 borrowed.
Related calculators
References
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. The present value of an annuity, from which the level-payment loan formula and its inverse follow.
- Reserve Bank of India. Key Facts Statement (KFS) for Loans & Advances. Circular, 15 April 2024.
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.