How to Calculate Car Loan EMI: A Complete Guide

Buying a car is a major financial decision. Most people use a loan to finance their purchase, but understanding how the Monthly Installment (EMI) is calculated can save you money.

The 3 Key Factors

Your car loan EMI depends on three things:

1. Vehicle Price & Down Payment: The actual loan amount is Price - Down Payment. The higher your down payment, the lower your loan and interest.
2. Interest Rate: Car loans usually have higher interest rates than housing loans. In many countries, they use Flat Rate interest, which is more expensive than it looks.
3. Loan Term: A longer term (e.g., 5 years) means lower monthly payments but higher total interest. A shorter term (e.g., 2 years) saves you interest but requires higher monthly payments.

Step-by-Step Calculation

Let's say you want to buy a car worth 30,000,000.

1. Down Payment: You pay 20% (6,000,000) upfront.
2. Loan Amount: 30,000,000 - 6,000,000 = 24,000,000.
3. Interest: The bank quotes 13% per year.
4. Term: You choose 3 years (36 months).

Scenario A: Reducing Balance (Bank Standard)

• Monthly Payment: ~790,000
• Total Interest: ~4,500,000

Scenario B: Flat Rate (Dealer Promo)

• Monthly Payment: ~926,000
• Total Interest: 9,360,000 (More than double!)

Tips for Borrowers

• Save for a larger down payment: Paying 30% instead of 10% can significantly reduce your monthly burden.
• Check the interest type: Ask if the rate is "Flat" or "Reducing". If it's Flat, use our Vehicle Loan Calculator to find the true cost.
• Keep the term short: Car value depreciates over time. You don't want to be paying for a car that's already old. Aim for 3-4 years maximum.

Use our Vehicle Loan Calculator to simulate different down payments and find the best plan for you.