10 Banks with the Lowest Car Loan Interest Rate in India (2026)
Key Highlights:
- 10 banks offering the lowest interest rates
- Understanding car loan
- NBFCs offering the lowest interest rates
- Lowest EMI per lakh
Getting an auto loan has become quite simple, especially if you have a good CIBIL score. There is a lot of competition among financial institutions to offer auto loans to deserving clients. This is one segment of loans where you will find a lot of options and offers available throughout the year. In 2026, you can get competitive rates across banks and non-banking financial institutions (NBFC) making it an ideal time for buyers across the country to finance their dream vehicles. Among all the banks, the public sector banks take the cake when it comes to offering the lowest interest rates. Let’s understand the world of auto loans and what the top bankers and financial institutions have to offer.
Overview of Car Loan Rates
If we were to simply look at the range in which the loans for new cars fall, then this range starts from 7.40% and goes to 13%, depending on factors like the type of bank, fixed or floating options, and individual eligibility.
As is the case with other loans, public sector banks like Punjab National Bank are offering rates starting at 7.40% p.a. for new cars. Some aggressive private players known for their auto loan department, like Kotak Mahindra Bank, are also offering rates starting around 8.25%.
While the rates are applicable pan-India, each borrower is different and analysed differently depending on their credit profile, and the final applicable rate is a function of the borrower profile and the repo rate of the time. So, let's look at some of the banks and financial institutions that are known to be the best choices for auto loans.
Kotak Mahindra Bank
In a recent development, Tesla EVs teamed up with Kotak Mahindra Prime to offer customers auto loans. The auto loan segment of Kotak is one of the best in the private sector banks, and it offers one of the lowest rates starting at 8.25% p.a. The bank is especially well-suited for salaried professionals, who are seeking fast pace, good rates and flexible tenures of up to 7 years. Even in the starting rates, the bank offers up to 100% of the on-road price for select models. This allows the borrower to give a minimum upfront cost. Kotak also offers a digital application process, and the EMIs for ₹1 lakh for a tenure of 7 years start at about ₹1,571. So if you have a budget sedan or mid-range SUV that you are looking for, make sure to check out the auto loan option from Kotak Mahindra Bank. Additionally, the bank offers processing fees in the range of ₹3,500 to ₹9,000. Do check with the branch at the time of your application as the rates, fees and offers are all subject to change.
State Bank of India
The country’s largest public sector bank has the advantage of a vast branch network, which gives it reach to the remotest corners of the country. State Bank of India (SBI) offers rates that start from 8.65% p.a. The EMIs start at approx. ₹1,591 per lakh for a tenure of 7 years. In addition to the regular offers and schemes, the bank has something called an SBI Loyalty Car Loan offer, under which the bank offers concessions for existing customers. The rates have dropped to 8.45% for existing home loan holders. For those looking for financing for electric vehicles, the bank has some additional offers that you can check from their branch and website. Do not forget to check for the latest offers on the bank’s portal, as rates and offers are subject to change.
Indian Bank
The other public sector bank in the running is the lesser-known Indian Bank. The bank is offering a very competitive rate of 8.60% p.a. This rate can go down further under the Eco Vahan scheme if you are a salaried individual and eligible for the scheme.
The bank is offering up to 85% financing for new cars, and the EMI for ₹1 lakh comes to about ₹1,589. Flexibility in tenure is available withan option of 7 years, with minimal processing at 0.50% plus GST. The good thing about acquiring loans from public sector banks is that there are no prepayment penalties after six months. So, if you have some surplus coming in, this is the best way to reduce your loan burden by pre-paying the loan using the surplus. Remember to check the bank’s official website or visit the branch for the latest offers, as the rates and offers are subject to change.
Punjab National Bank
Public sector lender Punjab National Bank (PNB) offer car loans starting from 7.40% p.a., translating to an EMI of ₹1,529 per lakh. The fixed rate loan begins from 8.75% with a loan cover of up to 90% for new cars over 7 years. The bank’s processing fee is about 0.25%. Do check the bank’s website for more offers and updated rates and offers, as they are subject to change.
Bank of Baroda
The starting rate for Bank of Baroda auto loans is about 8.70% p.a. with GCLI insurance. The floating rate is 8.15% for top-tier borrowers. The EMI starts at ₹1,594 per lakh, and if you are financing a luxury SUV of up to ₹1 crore, then there are nil processing fees.
IDBI Bank
IDBI Bank provides rates between 8.75%-9.55% p.a., with EMI starting at ₹1,596 per lakh for a 7 year tenure. The bank is trying to build a strong auto loan segment and has constant attractive offers for existing and new customers. Do check with the bank for the latest offers.
Bank of India
Another public sector bank that you can look at is the Bank of India. Rates start at 8.75% p.a., offering EMIs from ₹1,596. The bank finances up to 90% funding for new vehicles, and pre-payment can be made without penalty. Check the bank’s website or visit the branch to see the latest offers and rates. Both are subject to change.
Union Bank of India
The state-owned Union Bank offers rates starting at 8.85% p.a. The EMI starts at ₹1,601 per lakh, and the processing fee is on the lower side at around ₹1,000 plus GST. Check with the branch or website for the latest offers and rates, both of which are subject to change.
Bajaj Finserv
Among NBFCs in India, you can opt for Bajaj Finserv that offers rates starting at around 7.50% p.a. and 8.25% p.a. With Bajaj Finserv, you can opt for a tenure of up to 8 years and enjoy a quick online approval process depending on eligibility. This is a great option for salaried professionals seeking low EMIs on new vehicles.
Tata Capital
The second NBFC to look out for is Tata Capital, which offers a processing fee of under 2% and hybrid repayment options that allow part-prepayments without extra charges. The rates are similar to other NBFCs, and the EMI comes to about ₹1,500 per lakh at base rates.
If you have the right CIBIL score, income proof and complete KYC document,s you can avail attractive rates from banks and other financial institutions. Find out what you need and look for a tailored solution from one of the above banks.
FAQs
1. What is a car loan?
A car loan or an auto loan is one where the vehicle you are buying (new or old) is used as collateral by a financial institution to give you money on credit to buy it. The bank or NBFC gives 80-90% of the car's value as a loan. No additional collateral is typically needed beyond the car itself. A hypothecation remains on the registration certificate of the vehicle until the loan is completely paid.
2. What is the average tenure for a car loan?
Most car loans in India offer tenures from 1 to 5 years, though some extend to 7-8 years depending on the lender and loan size.
3. Is a down payment required?
All car loans require down payments. Between 10-20% is the standard; this covers the portion not financed by the lender. If you make a higher down payment, it brings down the EMIs and interest quotient for your loan.