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Used Car Loan

Used Car Loan Interest Rates, Calculator Oct 2021

Last Updated 21st Oct 2021

  • Compare and get the lowest used car loan interest rates @ 13.75%.
  • The maximum loan amount depends upon the market value or depreciated value of the car.
  • Maximum loan tenure of used vehicle loan ranges upto 7 years.
  • Get the best used car loan offers for both salaried and self employed individuals.
  • The Second - hand car loan is available at both fixed and floating rates.
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Used Car Loan Interest Rates Comparison, Lowest EMI Oct 2021, Best Rates

Bank Car Loan Interest Rates Lowest EMI per lakh for Max TenureMaximum Loan Amount
HDFC Bank Car Loan Rates 13.75% Fixed ₹ 1,860 for 7 years 100% of market value
SBI Car Loan Rates 9.75% Floating ₹ 2,112 for 5 years 85% of on-road price
ICICI Bank Car Loan Rates 12.00% Fixed ₹ 2,224 for 5 years 80% of market value
Kotak Bank Car Loan Rates 6.50% Fixed ₹ 1,957 for 5 years 90% of market value
PNB Car Loan Rates 8.15% Floating ₹ 2,035 for 5 years 70% of market value
Union Bank of India 10.40% Floating ₹ 2,144 for 5 years 50% of market value
Central Bank of India 7.25% Floating ₹ 1,992 for 5 years 75% of market value
Andhra Bank 10.40% Fixed ₹ 2,144 for 5 years 60% of market value
Federal Bank 13.80% Fixed ₹ 2,316 for 5 years 75% of depreciated value
Bank of India 6.85% Floating ₹ 3,081 for 3 years 70% of market value
Bank of Maharashtra 9.95% Floating ₹ 2,122 for 5 years 50% of market value

Second Hand Car Loan Interest Rates

  • Car loans are available for buying a new car, a used car, an SUV or a MUV.
  • SBI, ICICI, HDFC, Kotak, Bank of Baroda, Indian Bank, Bank of India and IndusInd Bank are among the many car loan options available.
  • Car loan schemes of each bank differ in terms of interest rates and other factors like maximum loan amount, loan tenure, EMI, processing fees and prepayment fees.
  • EMI schemes available include 0 interest scheme, advance EMI scheme, reducing balance scheme, fixed-rate scheme, floating rate scheme and zero-interest schemes.

Features of Used Car Loans

The features of the loans available for Used Car are different from the loans available for the new cars, and are mentioned below:

  • The loan offered for the Used Car ranges from 60% to 80% of the on-road price of the car.
  • As the risk associated with the used car loan is higher. So, the rate charged on used car loans is on the higher side and starts from 13.75%.
  • The process for applying for Used Car financing is simple and, most of the time is identical to the new car loan process.
  • There are very few or no restrictions on applying for a car loan. Any individual with a permanent income can apply for it.
  • The time period for the payment of the Used Car Loan is up to 7 years.

Eligibility for Availing Used Car Loans

Different banks and financial institutions have different sets of rules applicable for the second hand car loans. However, a general eligibility criteria to avail a used car loan is listed as follows:

  • Age of the Applicant: The age requirement for used car finance is 21 years to 65 years.
  • Income: An individual must have a regular source of income. The minimum income requirement to get a second-hand car loan is ₹ 18,000 for salaried and ₹ 1.50 Lakh per annum for businessmen or self-employed.
  • Work Experience: Banks ask for a minimum of 1 year of work experience in case of salaried individuals and business existence of 3 years for businessmen.
  • Credit Score: A credit score above 700 is considered a good score for a used car loan.
  • Age of the Vehicle: The vehicle must not be less than 10 years at the time of loan maturity.

Car Loan Queries

There are various terms and concepts associated with used car loans that often confuse second-hand car loan borrowers. These are listed as follows:

  • Ex-showroom price is the price of the car, including excise duty but excluding local duties and statutory charges.
  • On - road price is the price you pay for the car, including the ex-showroom price and cost of registration, insurance, octroi, municipal entry tax, road tax and any accessories. The on road price tends to be 15-25% more than the ex-showroom price and may vary from city to city.

Caution - Note that a car loan of 80% of the on road price is likely to be more than 95% of ex-showroom price.

  • EMI in arrears scheme – this is the standard method of paying EMI where the interest for a month (and principal repayment) is payable at or after the end of the month.
  • Advance EMI scheme – you pay interest and EMI at the beginning of the month. So, each month, you pay interest on the amount that you have already repaid to the bank at the beginning of the month.

Caution – In case your bank charges EMI in advance, the EMI amount should be about 1% lower than that in case of EMI in arrears. For those interested in more precise figures, EMI per ₹ 1 Lakh loan amount on a 60 - month car loan at 10% rate of interest as per EMI in arrears method comes to ₹ 2,125 while that as per EMI in advance method comes to ₹ 2,107.

  • Zero - interest car loan scheme (also called 0% finance scheme) – This is one of those free lunches that actually doesn’t exist. So, beware of schemes that claim to offer zero interest. It is likely that the car company is offering a subsidy scheme whereby the interest is paid by it to the bank upfront. Now, you could always ask the car dealer for the same amount as a cash discount. It’s like padding up the price of the car for the interest amount and marketing it under a nice name.
  • Flat rate of interest car loan scheme – In this method, you pay interest on the entire principal amount of car loan till maturity. So, on a ₹ 5 Lakh car loan at 10% for 5 years, you would have to pay back a total of ₹ 5 Lakh plus interest of ₹ 50,000 a year, that is a sum total of ₹ 7,50,000. The EMI in this case would be ₹ 12,500.
  • Reducing balance car loan scheme - In this method, you pay interest on the amount outstanding each month. With each EMI, the balance principal amount keeps reducing. So, on a ₹ 5 Lakh loan at 10% for 5 years, you would have to pay back a total of ₹ 5 Lakh plus interest on a reducing basis which comes to ₹ 1,37,411 or ₹ 6,37,411 including principal. The EMI in this case would be ₹ 10,624 a good 15% less than that for a flat rate scheme.

Caution – Never get hoodwinked with the low rate of interest offered on a flat rate scheme. A flat rate of 10% is equal to an interest rate of 18.7% on reducing rate basis on a five year car loan.

Should you opt for Floating or Fixed Interest Rates for Second Hand Car Loan?

The fixed rate of interest on a used car loan remains constant throughout the tenure and is not affected by the market fluctuations. However, availing of used car loans at a fixed rate means that you have to pay a 1-2.5% higher rate of interest. However, the floating rate of interest changes with the market fluctuations making it difficult to manage the budget. At the time of availing of a loan, if you are unsure about the type of interest you want to avail of on your car loan, you can request your lender to allow you to switch from fixed to floating rate of interest and vice-versa.

Factors Affecting Used Car Loan Interest Rate

Some of the factors affecting used car loan interest rates are listed as follows:

  • Age : One of the crucial factors that determine the rate of interest on a used car loan is the age of the vehicle, as it becomes risky for the bank if you default on your loan. That is why, the banks also charge a high rate of interest on used car loans.
  • Credit Score : Your credit history and the ability to repay the car loans on time also affects the used car loan interest rate. If you have a credit score of above 700, banks easily approve your loan at an economical rate of interest.
  • Down Payment : The amount of down payment you make on your car loan also impacts the car loan rates. The higher the down payment, the lower will be the rate of interest.
  • Income Level : Lenders assess your commitments, your debt, and income ratio to ensure you can repay your loan without any default. The lower the debt-income ratio, the better it is.

FAQs

Is a guarantor required for a used car loan?

Bringing in a guarantor is not required in most of the cases. However, in case the applicant's income is not meeting the minimum eligible criterion or if the cibil score is lower than expected, the bank may ask for the guarantor.

What is the maximum tenure for the used car loan repayment?

The maximum tenure for the used car loan is upto 7 years. But it is always advisable to apply for shorter tenure as longer tenure will mean higher interest.

Is there any need for collateral security for a used car loan?

No, there is no such provision as collateral for a pre owned car loan.

Is there any requirement of the down payment in case of a used car loan?

In most of the cases, there is no requirement of the down payment for used car finance.

Is interest on car loan tax-exempted?

No, unlike home loans, interest on used car financing is not tax free.

Are there any chances of negotiation in the interest rate of the used car loans?

Yes, individuals can negotiate provided they have a good credit score and timely payment history.Also, chances for negotiation are good if you opt for a used car loan from your existing bank.

Does the CIBIL score impact the used car loan interest rate?

Yes, your CIBIL score impacts the used car loan interest rate. The higher the credit score, the lower will the rate of interest on the car loan.

What are the main factors that affect the interest rate of a pre-owned car loan?

Some of the factors that affect the interest rate of a pre-owned car loan are the age of the car, your CIBIL Score, debt-to-income ratio, the amount of down payment etc.

How can I lower the interest rate on a used car loan?

To get the best rate on a used car, you must compare the used car loan rates of top lenders. Here are some tips to lower the interest rate:

  • Higher down payment
  • Good Credit Score
  • Extend the loan tenure

Are interest rates higher on used car loans?

Yes, the age of a car affects the rate of interest on a car loan. Lenders charge a high rate of interest on a used car loan. Currently used car loan rates begin at 13.75%.


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*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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