India’s car loans are getting bigger — and longer

The average passenger vehicle loan has risen to ₹8.2 lakh, while repayment periods now average 62 months, making EMI, tenure and prepayment terms critical for festive-season buyers.

For buyers like a 35-year-old Noida technology worker weighing a car purchase this festive season, the biggest challenge is not only choosing the model but deciding how much to borrow, for how long and on what terms. That calculation matters more now because car loans are getting larger and repayment periods are stretching out, according to TransUnion CIBIL data cited by Business Standard. The bureau said the average passenger vehicle loan in India rose to ₹8.2 lakh in the first half of 2026, up 49% from the same period in 2019, while the average tenure lengthened to 62 months. TransUnion CIBIL said the shift reflects rising vehicle prices and growing demand for higher-value models, especially SUVs.

Financial planners say the first step is to work out how much debt the budget can safely support. Abhishek Kumar, a Securities and Exchange Board of India-registered investment adviser and founder of SahajMoney.com, told Business Standard that total EMIs should stay within 40% of net take-home pay. That ceiling should be assessed alongside rent or home payments, daily expenses and any existing loans, as well as the cash available for a down payment. Borrowers who stretch too far on the principal risk creating a strain that lasts well beyond the purchase date.

Tenure deserves the same caution. Adhil Shetty, chief executive of BankBazaar, told Business Standard that a longer repayment period lowers the monthly instalment but raises the overall interest bill. Kumar added that buyers should choose the shortest tenure they can comfortably manage, particularly because vehicles lose value quickly. On a ₹10 lakh loan at 8.40% for five years, the total interest comes to ₹2,28,102, according to the figures cited in the report. Extending the loan to six years lifts the interest cost to ₹2,76,502, or 21.2% more.

Borrowers also need to factor in the possibility of higher borrowing costs. Experts quoted by Business Standard said the repo rate could rise by another 75 basis points after the 25-basis-point increase already announced. That does not mean car loans should be avoided, but it does make flexibility important. Raoul Kapoor, co-chief executive of Andromeda Sales and Distribution, told the newspaper that fixed-rate loans usually cost more than floating-rate loans, though they offer greater certainty. Floating-rate loans may be cheaper at the start, but only borrowers with enough budget headroom should take on the risk of higher instalments.

The fine print can matter almost as much as the headline rate. Kapoor said borrowers should check processing fees, prepayment charges, late-payment penalties and any lock-in period that prevents part-payments in the first six to 12 months. Some agreements also restrict how often part-prepayments can be made, he said. Whether a lender uses a prepayment to reduce the EMI or shorten the tenure is another crucial distinction; reducing tenure usually saves more interest over the life of the loan. On a fixed-rate product, prepayment fees can eat into those gains.

Festive promotions may look attractive, but not all concessions are equally valuable. Shetty told Business Standard that some lenders are waiving processing fees, while others are financing the full on-road price, which can reduce or eliminate the need for a down payment. Some are also offering repayment periods of up to seven years. Still, he said the interest rate remains the most important variable because it affects every instalment. No-cost extras such as accessories or cashback may be appealing, but they are one-off benefits. The better test is the total cost of borrowing over the full loan term.