According to reports from Business Standard, car loans are becoming increasingly larger and longer-term, with the average loan value rising to ₹8.2 lakh in the first half of 2026, up 49% from 2019. Financial experts recommend capping total equated monthly instalments at 40% of net take-home income when assessing loan size. As reported by Business Standard, the amount of liquid savings available for down payment should also be considered as a key factor in loan sizing decisions. For example, SahajMoney.com founder Abhishek Kumar advises that all your equated monthly instalments (EMIs) should not exceed 40% of net take-home income, while considering existing loans and living expenses.
As reported by TransUnion Cibil, car loan tenure has increased by five months to 62 months between the first half of 2019 and the first half of 2026. According to BankBazaar CEO Adhil Shetty, longer loan periods reduce monthly instalments but increase total interest costs. For a ₹10 lakh loan at 8.40% over five years, the total interest payable is ₹2,28,102. Extending the tenure to six years raises interest to ₹2,76,502, representing an increase of 21.2%. Vehicle depreciation makes longer repayment periods risky as borrowers may owe more than the car's actual value. SahajMoney.com founder Kumar recommends choosing the shortest tenure your monthly budget can comfortably accommodate to minimize total interest costs.
According to Andromeda Sales and Distribution co-CEO Raoul Kapoor, experts believe the repo rate could rise by another 75 basis points after the 25-basis-point increase already announced. Both fixed and floating rate loans are available, with fixed-rate loans typically carrying higher interest rates than floating-rate options. Borrowers choosing floating rates must have adequate budget flexibility to absorb higher costs.
As reported by Andromeda Sales and Distribution, borrowers should check whether loan agreements bar part payments during the initial six to 12 months and specify limits on pre-payments such as one or two EMIs annually. According to Business Standard, prepayment flexibility is crucial as most borrowers prefer to prepay, with some lenders offering repayment periods stretching to seven years. For fixed-rate loans, prepayment may result in fees that could erode gains from early repayment.
According to BankBazaar CEO Adhil Shetty, festive offers this year include waived processing fees, financing of full on-road price reducing or removing down payment needs, and extended repayment periods. As reported by Business Standard, some lenders are offering cashback and accessories as one-time gains, while lower processing fees and no penalty for early repayment are more beneficial than interest rate reductions. Experts recommend comparing total repayment costs across offers for a clear picture of the most advantageous terms.
