Here’s what to really keep in mind before signing a car loan agreement.EMI is only the starting point, not the full cost
According to Amit Setia, Chief Business Officer – Car Loans, brand name of Capri Global Capital (CGCL), borrowers often prioritise a lower EMI without assessing the total cost of the loan.
However, factors like interest rate, processing fees, documentation charges, and tenure can significantly change the final amount paid over time.
A longer tenure may reduce monthly EMIs, but it usually increases the total interest burden. A higher down payment, wherever possible, can help bring down both the loan size and long-term cost.
Loan structure matters more than many realise
Experts note that car loans are often evaluated too narrowly. Anto George T, VP & COO, South Indian Bank, a scheduled private-sector bank headquartered in Thrissur, Kerala, points out that buyers tend to compare EMIs but overlook key elements such as interest rate structure, repayment tenure, and how EMIs are split between principal and interest over time.
He also highlights that making small additional payments toward the principal, when allowed, can meaningfully reduce tenure and interest outgo. However, borrowers should check for prepayment conditions or lock-in clauses before doing so.
Total borrowing cost is what truly matters
From a broader lending perspective, Rishabh Goel, Founder and CEO, Credgenics, an AI-powered SaaS platform , notes that affordability pressures have increased, but many consumers still underestimate the impact of long loan tenures and processing charges.
A lower EMI may look attractive initially, but it can lead to significantly higher interest payments over time.
He emphasises the importance of understanding the effective cost of borrowing, including all associated charges, before making a decision.
Transparency in used-car financing is improving, but awareness matters
In the used-car financing space, Amit Kakkar, CEO, Spinny Capital, the in-house financial services and lending arm of Spinny, highlights that reputed platforms and lenders now disclose all charges upfront, reducing the risk of “hidden costs.” However, he cautions that buyers should still carefully review every component of the loan agreement.
He also notes that while used-car loans may carry slightly higher interest rates than new-car loans, the difference in monthly impact is often smaller than it appears, and financing can enable access to higher-value vehicles within the same budget range.
