Car on Installment : Points to Cover While Buying

Buying a car is easier when you buy car on instalment, but getting the finance right saves you thousands over the tenure. In India, lenders differ widely on interest, fees, and eligibility, so it pays to compare before you sign. Use a simple game plan: shortlist cars, estimate your budget, and then match the right loan structure to your needs. checklist below will help you cover every important angle.

Points to cover while buying

Start with your on-road budget (ex-showroom + insurance + registration + accessories) and decide how much you’re comfortable paying monthly without stretching other goals. Check whether the lender funds the ex-showroom price or a higher “on-road” amount, and how much down payment they expect. Review total cost of borrowing—interest + processing fee + documentation + any prepayment/foreclosure charges—rather than looking only at the headline rate.

Compare two to three banks/NBFCs and your own bank relationship offers. Look at convenience factors like digital KYC, turnaround time, and whether the dealer has a tie-up for faster disbursal. If you’re exploring a pre-owned vehicle, compare quotes from banks and dealer-tied financiers and search for a “used car loan near me” option to gauge local availability and valuation norms. Finally, read the sanction letter and key fact statement closely—loan amount, tenure, rate type (fixed vs floating), reset/switch rules, and all fees should be crystal clear.

Interest, tenure & EMI: get the maths right

The best car loan interest rate you qualify for depends on your credit profile, car segment, and tenure. For context, large public and private banks currently quote new-car rates starting in the ~9% range, while used-car loans often price a few percentage points higher. As one example, SBI lists new-car rates from 8.95%–9.90% and certified pre-owned from 11.50%–15.00% (updated August 14, 2025).

Before locking the tenure, run scenarios with a car EMI calculator. For instance, a ₹10,00,000 loan at 9.5% for 5 years works out to an EMI of roughly ₹21,002—manageable for many households, yet the total interest outgo changes significantly if you extend to 7–8 years. Shorter tenures raise the EMI but cut interest costs; longer tenures lower the EMI but increase total interest. Aim for the shortest tenure your cash flow comfortably allows.

Funding, fees & foreclosure: know the fine print

If you’re aiming for zero down payment car finance, check what “100% funding” actually covers. Some lenders advertise up to 100% of the on-road price for select profiles or pre-approved customers; others cap finance at a percentage and ask for a margin. For example, HDFC Bank’s new-car page highlights end-to-end digital loans and up to 100% funding, and comparison sites also note that some lenders finance the full on-road cost.

Fees vary a lot. SBI’s processing fee for new-car loans is a flat ₹750 (≤₹5 lakh), ₹1,250 (>₹5–10 lakh), and ₹1,500 (>₹10 lakh), while its certified pre-owned car loan carries 1.25% of the loan amount (min ₹3,750; max ₹10,000), all plus GST. Used-car loans at other banks may charge ~1% processing, with separate valuation and documentation fees.

Check prepayment terms early. Some lenders levy higher charges if you foreclose in the first year (e.g., up to 6%), and ~5% charges are common on part-prepayment or foreclosure for certain used-car products; others waive part-prepayment after a seasoning period. If your loan is floating, RBI guidance allows borrowers to switch between fixed and floating (with applicable charges), so ask how often you can exercise a switch and what it costs.

Online journey, documents

Digital journeys can speed things up—especially if you car loan apply online or are eligible for a bank’s in-app offer. HDFC advertises an end-to-end digital process with quick disbursal (often “within 30 minutes” for eligible profiles), and ICICI showcases pre-approved, paperless flows with up to 100% on-road funding. If you see “pre-approved car loan instant approval,” confirm what’s truly instant (approval vs. disbursal) and what additional checks remain.

For documentation, keep your PAN, Aadhaar/ID, address proof, salary slips/bank statements (typically last 3–6 months), and a proforma invoice from the dealer. Banks publish detailed lists; as a guide, ICICI outlines KYC, income proof and bank statements for salaried and self-employed applicants, and Axis summarises the general document set for new-car loans. Used-car loans usually add valuation and RC details, and some lenders even claim up to 100% finance on select pre-owned vehicles—though rates are higher (e.g., ICICI’s used-car rates start from 11.25%+).

Conclusion

A smart instalment purchase balances the car you want with the loan you can live with. Compare two to three offers, tally the total cost (not just the rate), and clarify fees, resets, and prepayment rules before you sign. Build a modest buffer in your monthly budget so the EMI stays stress-free, and keep documents ready to fast-track approval. When you’re set, apply with your top choice and drive home confident you’ve made a well-priced decision.