Car Loans Up 49%: Are You Borrowing Too Much?

The average car loan in India has jumped 49% to ₹8.2 lakh since 2019. Higher loan amounts mean bigger EMIs and more interest paid overall. Before you drive off the lot, here's what to check.

Here's what happened: The average passenger vehicle loan in India has risen 49% to ₹8.2 lakh compared to the first half of 2019, according to TransUnion CIBIL's latest industry report.. Two-wheeler lending is expanding beyond first-time borrowers into repeat and upgrade buyers, widening the credit base in the vehicle finance segment.. Rising car prices driven by new features, safety mandates, and input costs have pushed buyers to borrow larger amounts, stretching both tenure and total interest outgo..

What you should do: Calculate your EMI-to-income ratio before applying — your total EMI obligations should not exceed 40-45% of your monthly take-home pay to stay financially comfortable.. Compare the Annual Percentage Rate (APR), not just the headline interest rate, across at least 3 lenders — NBFC vs bank rates can differ by 1.5-2.5% on the same profile.. Choose the shortest loan tenure your budget allows — dropping from 7 years to 5 years on an ₹8 lakh loan at 10% saves you roughly ₹45,000-₹55,000 in total interest..

Pro tip: Making one extra EMI payment per year directly towards principal can cut a 5-year car loan down by 4-6 months and save you ₹15,000-₹25,000 in interest with zero prepayment penalty on floating-rate loans.

For borrowers watching their score, our CIBIL score guide covers what impacts it and how to improve it.