Choosing the lowest interest rate car loan India can save you ₹25,000 to ₹1.5 lakh over the loan tenure.
But interest rates vary based on bank type, CIBIL score, income profile, and whether you are buying a new or used car.
This updated 2025 guide compares the lowest car loan rates in India, EMI examples, bank-wise benefits, eligibility rules, and expert tips—written for first-time car buyers and loan seekers.
Why Car Loan Interest Rates Matter in 2025
Car ownership cost has increased due to:
- Higher ex-showroom prices
- Expensive insurance premiums
- Increased processing and RTO fees
- RBI tightening of retail lending norms
Even a 0.50% difference in interest rate can change your EMI on a ₹6 lakh loan by ₹400–₹800 per month.
This guide helps you choose the right lender—not just the lowest EMI on paper.
Which Bank Has the Lowest Car Loan Interest Rate in India?
As of 2025, SBI offers the lowest car loan interest rate in India, starting around 8.7% for salaried buyers with CIBIL 750+.
Close competitors include HDFC Bank and Axis Bank, while NBFCs like Tata Capital suit applicants needing flexible documentation.
Latest Lowest Car Loan Interest Rate in India
Interest rates vary based on CIBIL score, income type, city, and loan amount.
Car Loan Comparison Table (New Cars 2025)
| Bank | Interest Rate (2025) | Processing Fee | Min Salary Required |
| SBI | 8.70% – 9.20% | ₹2,000 – ₹5,000 | ₹15,000/month |
| HDFC Bank | 8.90% – 10.50% | Up to 1% | ₹20,000/month |
| Axis Bank | 9.10% – 10.40% | ₹3,500 – ₹6,000 | ₹18,000/month |
| ICICI Bank | 9.00% – 10.75% | ₹3,500+ | ₹20,000/month |
| Kotak Mahindra Bank | 9.25% – 10.75% | 0.5% – 1% | ₹20,000/month |
| Tata Capital (NBFC) | 10.25% – 14% | 1–2% | Flexible |
| Mahindra Finance (NBFC) | 11% – 15% | 1–2% | Rural-friendly |
Note: Rates vary by CIBIL score, tenure, and car model (new vs used).
Zero Interest Car Loan in India – Is It Real?
Direct Answer (40–50 words)
There is no true zero-interest car loan in India.
Offers advertised as 0% interest are usually subvention schemes, where the dealer increases the car price or charges hidden processing fees to compensate.
Always compare on-road cost + total payable, not just EMI.
New vs Used Car Loan Rates in India
| Loan Type | Interest Rate | LTV (Loan-to-Value) | Tenure |
| New Car Loan | 8.7% – 10.5% | Up to 90% | 1–7 years |
| Used Car Loan | 10.5% – 18% | 50–70% | 1–5 years |
Used cars require RC transfer, IDV-based insurance, and additional verification.
Car Loan EMI Calculator Example
EMI for ₹6 Lakh Loan at 9% for 5 Years
| Loan Amount | Interest Rate | Tenure | Monthly EMI |
| ₹6,00,000 | 9% | 60 months | ₹12,437 approx |
Total Interest: ~₹1,46,220
Total Payable: ~₹7,46,220
If Rate Increases to 10.5%
| Loan Amount | Interest Rate | Tenure | Monthly EMI |
| ₹6,00,000 | 10.5% | 60 months | ₹12,939 approx |
Extra Interest Paid: ~₹30,000+
Improving CIBIL score can reduce interest significantly.
Best Bank for Car Loan in India
Lowest Interest Rate – Salaried Buyers
- SBI
- Lower processing fees
- High LTV (up to 90%)
Fastest Approval & Digital Processing
- HDFC Bank
- Strong dealer network
- Instant e-approval for pre-approved customers
Best for Self-Employed
- ICICI Bank / Axis Bank
- Flexible income assessment
Best for Rural & No-CIBIL Applicants
- Mahindra Finance
- Tata Capital
- Suitable for agricultural income
Best for Salary Account Holders
- Same-bank lending gives:
- Rate concession
- Lower documentation
- Faster disbursement
Eligibility Rules for Lowest Rate Approval
Minimum Requirements
- Age: 21–65 years
- CIBIL score: 750+ preferred
- Income:
- ₹15,000–₹25,000/month depending on bank
Factors Affecting Interest Rate
- Employment stability (1 year minimum)
- Down payment amount
- Banking history
- Existing EMIs (DTI < 40%)
- Car type and variant
RBI note: Hard credit inquiries can temporarily impact score.
Documents Required
Salaried
- Aadhaar + PAN
- 3 months salary slips
- 6 months bank statement
- Address proof
- Passport-size photos
Self-Employed
- ITR (2 years)
- GST certificate
- Business proof
- Current account statement (12 months)
Processing Fees & Hidden Charges To Check
- Processing fee (₹2,000 – 1% of loan)
- Documentation charges
- Hypothecation fee (RTO)
- Prepayment penalty (fixed-rate loans)
- Late EMI penalty (2–3% per month)
- NOC removal after loan closure
Ownership Cost Beyond EMI
| Year | Service Cost | Insurance | Maintenance | Total |
| 1 | ₹4,000 | ₹22,000 | ₹2,000 | ₹28,000 |
| 2 | ₹6,000 | ₹20,000 | ₹3,000 | ₹29,000 |
| 3 | ₹8,000 | ₹18,000 | ₹5,000 | ₹31,000 |
IRDAI reminder: Review IDV every renewal to avoid underinsurance.
Pros & Cons of Low-Interest Car Loans
Pros
- Lower EMI and total cost
- Higher loan eligibility
- Easier budgeting
Cons
- Strict documentation
- High CIBIL required
- Limited flexibility for self-employed
Tips to Get the Lowest Car Loan Interest Rate
- Maintain CIBIL 750+
- Increase down payment to 20–25%
- Choose shorter tenure (3–5 years)
- Compare at least 3 banks + 1 NBFC
- Avoid applying to multiple lenders at once
- Check pre-approved salary account offers
- Make part-prepayments whenever possible
Conclusion:
The lowest interest rate is important, but the right bank depends on your income, CIBIL score, and loan type. Always compare total cost—not just EMI—and keep car loan EMI under 25% of your monthly income.
FAQ:
Q. Which bank gives the lowest car loan interest rate in India?
A. As of 2025, SBI offers one of the lowest car loan interest rates, starting at around 8.7%. HDFC Bank and Axis Bank also offer competitive rates, depending on your CIBIL score, income, and overall credit profile.
Q. Is a zero-interest car loan available in India?
A. No, true zero-interest car loans are not available in India. Such schemes are usually marketing offers, where the interest cost is adjusted into the car price, processing fee, or other charges. Always check the total payable amount before opting for these offers.
Q. What CIBIL score is required for the lowest car loan interest rate?
A. To get the lowest interest rates, you typically need a CIBIL score of 750 or above. Scores below 700 often result in higher interest rates or even loan rejection.
Q. Which bank is best for self-employed car loan applicants?
A. For self-employed individuals, ICICI Bank, Axis Bank, and NBFCs like Tata Capital offer more flexible documentation requirements and better approval chances compared to public sector banks.