Finance
Car Loan Guide India: Rates, EMI, and What to Check
Car loan rates in India start around 8.25% for new cars, and used-car rates run three to five points higher. Your credit score decides which you get.
By Nina Shah · Updated · 9 min read
Short answer
What is a good car loan interest rate in India?
New car loan rates in India start at about 8.25% from Bank of India, with SBI at 8.75% to 9.25%, ICICI at 8.85% to 9.60%, Union Bank at 8.70% to 9.10% and HDFC at 9.00% to 9.75%. Used car loans cost far more - roughly 10.25% to 14% at the same banks. A CIBIL score above 750 gets you the lowest advertised band; 700 to 749 adds 0.25% to 0.50%, and below 700 adds one to two points or leads to rejection.
Our practical verdict
A car loan is one of the few large borrowings where the advertised rate is close to achievable, provided your credit score is good. New car rates in 2026 start around 8.25% and cluster between 8.7% and 9.75% at the major banks. That spread of about a percentage point is worth roughly Rs 25,000 on a Rs 8 lakh loan over five years, which justifies an afternoon of comparison.
The bigger number is the new-versus-used gap. Used car loans run 10.25% to 14% at the same banks, and the spread between lenders widens sharply - SBI charges about 1.5 points more for used, ICICI closer to four. If you are buying pre-owned, which bank you use matters far more than it does on a new car.
Your credit score is the other lever, and it is the one you control. A CIBIL score above 750 unlocks the lowest band. Between 700 and 749 adds a quarter to half a point. Below 700 adds one to two points, or gets you declined. Pulling your report, disputing errors and clearing small outstanding balances before applying is usually worth more than any negotiation at the dealership.
Shortlist
Recommended options to compare
Use this as a starting list, then compare live India prices and warranty before buying.
Pick 1
Bank of India, from about 8.25%
The lowest advertised new car rate here. Public sector banks generally lead on rate and lag on processing speed, which is the trade you are making.
Pick 2
Union Bank, 8.70% to 9.10%
Repo-linked and among the lowest, with the best rates going to government employees. Worth checking if you qualify for that category.
Pick 3
SBI, 8.75% to 9.25% new and 10.25% to 11.50% used
The widest branch network and a competitive rate. The used-car gap of roughly 1.5 points is smaller than most private banks charge.
Pick 4
ICICI, 8.85% to 9.60% new and 12% to 14% used
Fast processing and strong dealer tie-ups. The used-car premium is steep, so compare against SBI if you are buying pre-owned.
Pick 5
HDFC, 9.00% to 9.75% new and 11.50% to 13.50% used
Convenient if you already bank there and dealers often push it, but it is the most expensive new-car rate in this group. Convenience has a price.
Which option should you choose?
Bank of India, from about 8.25%
The lowest advertised new car rate here. Public sector banks generally lead on rate and lag on processing speed, which is the trade you are making.
Union Bank, 8.70% to 9.10%
Repo-linked and among the lowest, with the best rates going to government employees. Worth checking if you qualify for that category.
SBI, 8.75% to 9.25% new and 10.25% to 11.50% used
The widest branch network and a competitive rate. The used-car gap of roughly 1.5 points is smaller than most private banks charge.
ICICI, 8.85% to 9.60% new and 12% to 14% used
Fast processing and strong dealer tie-ups. The used-car premium is steep, so compare against SBI if you are buying pre-owned.
HDFC, 9.00% to 9.75% new and 11.50% to 13.50% used
Convenient if you already bank there and dealers often push it, but it is the most expensive new-car rate in this group. Convenience has a price.
Choice IQ pick
Need the faster shortlist?
Start with our recommended options, then compare the tradeoffs that matter for your budget and workflow.
See top picksHow to decide
Pick the option around the job you need done. This is the fastest way to avoid paying for something that looks impressive but does not change your real workflow.
| Situation | Best starting point | Final check |
|---|---|---|
| Bank of India, from about 8.25% | The lowest advertised new car rate here. Public sector banks generally lead on rate and lag on processing speed, which is the trade you are making. | Use this as a shortlist, then verify the final details before committing. |
| Union Bank, 8.70% to 9.10% | Repo-linked and among the lowest, with the best rates going to government employees. Worth checking if you qualify for that category. | Use this as a shortlist, then verify the final details before committing. |
| SBI, 8.75% to 9.25% new and 10.25% to 11.50% used | The widest branch network and a competitive rate. The used-car gap of roughly 1.5 points is smaller than most private banks charge. | Use this as a shortlist, then verify the final details before committing. |
| ICICI, 8.85% to 9.60% new and 12% to 14% used | Fast processing and strong dealer tie-ups. The used-car premium is steep, so compare against SBI if you are buying pre-owned. | Use this as a shortlist, then verify the final details before committing. |
Read the editorial notes
Be careful with dealer-arranged finance. It is convenient and sometimes genuinely competitive, but the dealer is paid for arranging it, and the rate quoted is not always the best you could get. Get a sanction from your own bank first so you have a number to compare against.
Before signing: 1. Check the processing fee, typically 0.25% to 1% of the loan. 2. Confirm whether the rate is fixed or repo-linked, and what happens when the repo rate moves. 3. Ask about prepayment charges - fixed-rate car loans can carry them. 4. Use the car loan calculator to check the EMI against your actual monthly surplus, not your gross salary.
Decision shortcut
Still comparing options?
Use the table above to shortlist your best fit, then check related picks, tools, and buying guides before you make the final call.
FAQ
What is a good car loan interest rate in India?
Anything at or below about 8.75% on a new car is competitive in 2026. Below 8.25% is at the very best end. Used car loans are structurally more expensive, so 10.5% to 11.5% is a reasonable target rather than a bad deal.
Why are used car loan rates so much higher?
The asset depreciates faster and is harder to value and repossess, so lenders price in more risk. The gap is typically 1.5 to 4 percentage points depending on the bank, and it is one of the real hidden costs of buying used.
Does my CIBIL score change my car loan rate?
Substantially. Above 750 you get the lowest advertised band. Between 700 and 749 expect 0.25% to 0.50% more. Below 700 you may pay one to two points extra or be declined. Checking and fixing your score before applying is usually worth more than negotiating with the dealer.
This guide is educational. Interest rates, charges and eligibility in India change frequently and vary by borrower profile, so verify current terms with the bank before applying.
Finance Guides Lead
Nina writes about everyday money decisions, credit cards, calculators, and transparent personal finance tools.
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The best choice is rarely the product with the longest feature list. It is the one you will still trust and use six months from now.
How Choice IQ evaluated this guide
Choice IQ evaluates car loans in India by advertised and realistic interest rate bands, the new versus used spread, CIBIL score impact, processing fees, prepayment terms and dealer finance versus direct bank sanction.
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