Planning to buy a car? The financing method matters as much as the car choice.
The Rate Difference
Car loan: 7.5-11% (secured). Personal loan: 10.5-18% (unsecured). On ₹10L over 5 years: Car loan EMI ≈ ₹20,276. Personal loan EMI ≈ ₹22,244. Difference: ₹1,968/month = ₹1.18L over tenure. See our [Car Loan vs Personal Loan comparison](/compare/car-loan-vs-personal-loan).
When Personal Loan Works
Buying from a private seller (no dealer financing). Need money for accessories/modifications too. Poor documentation (personal loan is simpler). Bad credit history with the auto lender.
The 0% Financing Trap
Dealer 0% EMI usually means: Reduced discount on car price. Higher insurance premium (forced comprehensive). Processing fees. The effective rate is often 4-7%. Always compare: (On-road price with 0% EMI) vs (Negotiated cash price + separate car loan).
Down Payment Strategy
Minimum 20% down payment. Higher down payment = lower EMI and total interest. But don't deplete your emergency fund. Use our [Car Loan Calculator](/calculators/car-loan-calculator) and [Loan EMI Calculator](/calculators/loan-emi-calculator) to compare options.
Should You Even Take a Loan?
Cars depreciate 15-20% in year 1. A ₹10L car is worth ₹5-6L in 5 years while you paid ₹12L (principal + interest). Consider: buy used, buy smaller, or save and pay cash.