New vs Used Car Loans — What to Know
New Car Loans
When it fits: You want the latest features, full warranty, and easier financing. Banks generally offer lower rates, higher LTV, and longer tenures.
- Pros: Lower rate, predictable costs, cheaper insurance add-ons bundled, better resale in early years.
- Cons: Highest depreciation in the first 3 years, on-road price extras add up.
- ClickLends tip: Keep tenure ≤ 60 months; pay at least one extra EMI/yr to cut interest by 6–10%.
Used Car Loans
When it fits: Budget-friendly; depreciation already absorbed. Lenders cap tenure for older vehicles and may charge a slightly higher rate.
- Pros: Lower purchase cost, slower future depreciation, wide model choice.
- Cons: Shorter tenure, rate/processing can be higher; inspect service history thoroughly.
- ClickLends tip: Run our depreciation preview. Aim down-payment ≥ 25% for 3–6 year old cars.
Prepayment Strategy (Wins Big)
- Extra EMI per year: Adds one or more full EMIs annually; reduces tenure without paperwork.
- Annual lump sum: E.g., bonuses. Even ₹25k/year can shave months off.
- One-time part-payment: Target month 12–24 when interest component is still high.
- Step-up EMI: If income rises predictably, increasing EMI by 5–10%/yr accelerates payoff.
Car Loan EMI Calculator – FAQs
Is the EMI result guaranteed?
It’s an illustration based on your inputs and standard amortization. Final EMI/tenure/charges depend on bank appraisal and sanction terms.
How do you calculate EMI?
We use EMI = P×r×(1+r)^n / ((1+r)^n − 1) where r = APR/12. With prepayments and step-ups, we recompute the schedule month-by-month.
What’s the difference between ex-showroom and on-road?
Ex-showroom is base price. On-road ≈ ex-showroom + RTO/registration + insurance + handling/other state levies. Enter on-road directly or let the builder compute it.
How much down-payment should I plan?
New cars: 15–25% is common. Used cars: 25–40% is typical (age-dependent). Higher down-payment reduces EMI and total interest.
What tenure is ideal?
Choose the shortest tenure that keeps EMI comfortable. New cars usually 36–84 months; used cars can be capped lower due to age/valuation.
How are prepayments applied here?
We assume tenure reduction (EMI unchanged) which maximizes interest saved. Some lenders offer EMI reduction; check your sanction letter.
What is a step-up EMI and why use it?
EMI increases by a chosen % each year (e.g., 5–10%) to match rising income. Paying more sooner reduces principal faster and interest overall.
Are prepayments free?
Not always. Many lenders levy a part-prepayment/foreclosure fee after lock-in. We let you input a prepayment fee % to see net savings.
How does used-car financing differ?
Shorter max tenure, slightly higher APR/fees, and stricter valuation. Ensure clean RC, NOC (if hypothecated earlier), service history, and accidental/flood checks.
Will insurance be financed into the loan?
Some banks finance 1st-year comprehensive; others require you to pay separately. Use the Add-on field to include any financed extras.
Why does total interest jump with longer tenure?
Lower EMIs keep the loan alive longer; you pay interest for more months. Shorter tenure + periodic prepayments is usually cheaper overall.
What credit score helps get better rates?
Typically 750+ (CIBIL). Strong income stability, lower FOIR, and clean credit history improve approval odds and pricing.
What documents are usually needed?
PAN/Aadhaar (KYC), address proof, income proof (salary slips/ITR/banks), and proforma invoice (new) or RC/insurance (used). Lenders may ask more.
Can I foreclose early?
Generally yes after a lock-in; charges may apply. Enter a one-time part-payment in our tool to estimate interest saved and revised payoff.
Fixed vs floating rate — which to choose?
Fixed offers stable EMIs but can be higher initially. Floating changes with repo/MCLR. Choose based on rate outlook and risk tolerance.
How accurate is the depreciation preview for used cars?
It’s indicative for your planning only; lenders use their own valuation matrix. Always get a trusted physical inspection for older vehicles.