Best Car Loan Interest Rates in India (2026): A Bank-by-Bank Comparison

Key Highlights:

• Lender comparison for car loans
• Tips for borrowers
•   Public and private sector bank comparison
• Details on car loans by NBFCs

India has a robust auto loans industry, one where every bank and financial institution has a unique offering for the customer. Car loans in India get financed up to 80-100% of a vehicle’s on-road price. The determining factors are the lender, the borrower’s credit score, and income. The interest rate range for auto loans is around 7.3-9% per annum for new cars, and tenures extend up to 7-8 years. The interest rate is subject to the borrower's profile.

Broadly, you can opt for three types of car loans – the first being the new car loan, which has lower rates and minimal down payments. Second, being used car loans for vehicles under five years old, but they come with higher rates and shorter tenures, and lastly, there is the refinancing option.

Car loan rates in India are governed by the repo rate set by the Reserve Bank of India, which has been trying to create borrower-friendly policies, influencing EMIs significantly for new and used cars nationwide. To choose the best car loan for you, let’s look at each type of institution that offers one, namely, public sector banks (government-owned banks), private sector banks and non-banking financial institutions (NBFCs). Let’s do a comparison of what each one has to offer in terms of rate, tenure and processing fee.

Public Sector Banks

One of the lowest car loan rates is offered by public sector banks, with interest rates starting from 7.35% p.a. With public sector banks, the KYC process and documentation takes a bit more effort, but in terms of interest rates, tenure and pre-payment charges, these banks have several customer-friendly policies.

Banks like UCO Bank, Union Bank of India are currently giving new car loans between 7.35% p.a and 7.40% p.a respectively. With Public sector banks, a high CIBIL score of 750 plus helps you get flexible options under schemes that reward high CIBIL scores. These loans also have minimal processing fees of about 0.25%.

Another public sector player, Punjab National Bank, offers car loans starting at 7.50% p.a., and they have schemes like Apna Vahan Sugam for rural and urban buyers alike, ensuring pan-India reach with tenures of up to 84 months.

Moving to other public sector banks, Bank of Maharashtra and Punjab & Sind Bank offer between 7.50%-7.65% p.a. Often, one of the most significant advantages of borrowing from public sector banks is that prepayment penalties on floating rates are usually nil or very low. This can save you a lot of money if you are looking to pre-pay your loan.

Private Banks Breakdown

Private sector lenders like HDFC Bank, Kotak Mahindra Bank, ICICI Bank, etc. are a few names that offer auto loans at attractive prices. The loan is available at interest rates ranging between 8.20-8.50% p.a or higher.  Private Banks also offer some appealing services to urban customers with premium features like doorstep services and instant approvals via apps. These features are immensely useful for those with time limitations and a lack of branch access.

Banks like ICICI Bank start their car loans at 8.50% p.a, Axis Bank edges in at 8.50-8.95% p.a., Kotak Mahindra Bank offers interest rates of about 8.75% p.a., while Yes Bank ranges 8.75-9.50% p.a.

NBFC

If your credit profile isn’t too strong or there are some factors affecting your income or KYC documents, then you can look for car loans from suitable NBFCs. Bajaj Finserv is a leading NBFC that offers car loans starting at 7.50% p.a. for new cars with tenures up to 96 months. Shriram Finance, another pan-India NBFC, starts its interest rates at 10% p.a. Tata Capital provides new car loans for 8.25% p.a., offering rates that are very close to the ones offered by banks.

For self-employed borrowers, banks might demand stricter income proof. NBFCs are a good choice. Even for CIBIL scores of 700+, some of the NBFCs offer competitive rates.

Tentative EMI

Let’s look at some calculations to better understand how each lender stacks against the other in terms of EMI. For a ₹5 lakh loan at 7.35% over 60 months, UCO Bank's EMI comes to about ₹9,983, for a ₹5 Lakh loan at 7.35% for over 60 months. For HDFC Bank, the EMI amount comes to about ₹10,250 EMI at 8.50%.

For a ₹10 lakh loan, public sector bank Punjab National Bank's EMI comes to ₹19,900 monthly at 7.50%, versus ICICI Bank’s 8.50% at ₹20,500.

In the used car space, the premium is about 1-3% more. Also, for women and salaried applicants with good credit profiles, interest rate discounts of about 0.05-0.15% can be achieved, depending on the lender and the offer. Please note that rates are subject to change at any time. Do check the NBFC websites or visit their branch to find out the latest offers.

Tips for Borrowers

When you set out to apply for a car loan, compare at least five lenders. The rates and offers by public sector lenders will give you an idea of what the baseline looks like.

Go for private sector banks or NBFCs for speed and quick disbursals. Also, do not forget to put aside a good amount for a down payment. The higher the down payment, the lower the interest outgo and lenders see it as a sign of trust in the borrower.

At certain times in the year, lenders and carmakers run joint offers that involve discounts on bank fees and other add-ons. Try to look for these festive offers when you are applying for the loan; these can bring down the upfront cost that you have to pay.

FAQs

1. Is a down payment required for a new car?
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.

2. New vs. used car loan rates?
The rates for new cars are better than those of old ones. For new cars, you can get loans in an average range of 8.25-11.25%. Whereas for used cars, this starts from 10.50% as the financial institutions have to factor in depreciation and resale uncertainty. For some used car loans, the rates can reach as high as 15-26%. Also, the borrower profile is the single most important factor in asserting interest rate value. ​

3. How to secure the lowest rates?
Keep a healthy CIBIL score. Nothing else has more weight than your CIBIL score. So pay attention to it before applying. Make a 20% down payment, choose shorter tenures, and apply to multiple lenders for the best offers.