RBI cuts repo rate to 6%: How much cheaper your car loan may now get
With interest rates on loans likely to go down, more people may consider new buying vehicles
 "RBI cuts repo rate to 6%: How much cheaper your car loan may now get")
The Reserve Bank of India (RBI) lowered its key repo rate on Wednesday for a second consecutive time and changed its monetary policy stance to accommodative from neutral, signalling its intention to support growth amid risks from US tariffs.
Repo rate being reduced to 6 per cent is expected to benefit borrowers of car and two-wheeler loans, which are part of the retail loan segment. If banks fully pass on the rate cut, such loan customers could see a decrease of 25 basis points (0.25 per cent) in their interest rates.
“The RBI’s latest move to cut the repo rate by 25 basis points to 6 per cent can make car loans more affordable. As banks and lenders borrow at lower costs from the RBI, they may reduce lending rates for consumers. This could lead to lower interest rates on new car loans, reducing monthly EMIs [equated monthly installment] and overall interest burden for borrowers,” said Adhil Shetty, chief executive officer of Bankbazaar.com.
“Existing car loans linked to external benchmarks like the repo rate may also see a reduction in rates. However, the extent of benefit depends on how quickly and how much banks pass on the rate cut to customers. Overall, this move aims to boost consumer spending, including auto purchases, amid economic uncertainties,” he said. ALSO READ | Home loan EMIs set to fall after RBI rate cut: Tips to maximise savings
Use a car loan calculator to find out how much your EMI would reduce if you took a loan of Rs 10 lakh for 5 years and interest rates went down.
Current loan rate
Loan amount: Rs 10 lakh
Loan tenure: 5 years
Interest rate: 8.95 per cent per annum
EMI: Rs 20,734
Total interest over the tenure: Rs 2,44,046
Total loan payment: Rs 12,44,046
Potential EMI after rate cut
Loan amount: Rs 10 lakh
Loan tenure: 5 years
Interest rate: 8.70 per cent per annum (after a 0.25 per cent rate cut)
EMI: Rs 20,613
Total interest over the tenure: Rs 2,36,784
Total Payment: Rs 12,36,784
(Note: This calculation is based on the SBI Securities car loan EMI calculator.)
How much do you save on EMI and interest?
The car loan EMI calculation shows that a 0.25 per cent cut in the interest rate would reduce your EMI by Rs 121. If your car loan interest rate remains steady for the next 5 years, you’ll end up paying Rs 7,262 less in total interest.
Borrowers with floating interest rate car loans will benefit more
Car loans can be availed of on either a fixed or floating interest rate, depending on the borrower’s preference. With a fixed interest rate, there’s no change throughout the loan tenure. However, with a floating rate, the EMI may increase or decrease based on changes in the repo rate. So, in the current scenario of declining interest rates, the interest payable on car loans is also expected to come down. Let us have a look at car loan rates by different banks compiled by paisabazaar.com:
| NEW CAR LOAN-RATES AND CHARGES | |||
| Name of Lender | Interest rate (%) p.a. | EMI (Rs) Loan amount-5 lakh Tenure-5 years | Processing fee (% of loan amount) |
| Union Bank of India | 8.45-10.20 | 10,246 - 10,673 | Up to Rs 1,000 |
| Punjab National Bank | 8.50-10.35 | 10,258 - 10,710 | Up to 0.25% (Rs. 1,000 - Rs. 1,500) |
| Bank of Baroda | 8.80-12.45 | 10,331 - 11,236 | 0.50% (Rs 2,500 - Rs. 10,000) |
| Canara Bank | 8.45-12.45 | 10,246 - 11,236 | 0.25% (Rs 1,000 - Rs. 5,000) (Processing fees are 100% waived off from 1.01.2025 to 31.3.2025 for its Retail Loan Festival) |
| Bank of India# | 8.75-12.20 | 10,319 - 11,173 | Up to 0.25% (Rs. 2500 - Rs. 10,000) (50% concession in the applicable processing fee on purchasing e-Vechicles) |
| UCO Bank | 8.35-11.00 | 10,222 - 10,871 | NIL |
| State Bank of India | 9.10-10.15 | 10,403 - 10,660 | NIL |
| IDBI Bank | 8.80-9.60 | 10,331 - 10,525 | Rs 2,500 |
| Bank of Maharashtra* | 8.45-12.75 | 10,246 - 11,313 | 0.25% of the loan amount (max. up to Rs. 15,000) |
| Indian Overseas Bank** | 8.40-12.00 | 10,234 - 11,122 | 0.50% (Rs 500 - Rs 5,000) |
| ICICI Bank | 9.10 onwards | 10,403 onwards | Up to 2% |
| HDFC Bank | 9.20 onwards | 10,428 onwards | Up to 1% (Rs 3,500 - Rs 9,000) |
| Karnataka Bank | 9.32-11.80 | 10,457 - 11,072 | Up to 0.60% (Rs 2500 - Rs 11,000) |
| Federal Bank | 10.40 onwards | 10,722 onwards | Rs 2,000 - Rs 4,500 |
| Punjab and Sind Bank*** | 8.70-10.10 | 10,307 - 10,648 | 0.25% (Rs 1,000-Rs 15,000) |
| Indian Bank | 8.50-9.85 | 10,258 - 10,587 | Rs. 1000 |
| IDFC First Bank | 9.99 onwards | 10,621 onwards | Up to Rs 10,000 |
| City Union Bank | 14.45-14.95 | 11,751 - 11,882 | 1.25% (Min: Rs 750) |
| *0.25% interest rate concession for existing housing loan borrowers and corporate salary account holders. | |||
| **0.50% interest rate concession to borrowers with credit scores of 800 and above. Interest rate concession of 0.25% to borrowers having credit scores of 750-799. | |||
| ***Concession of up to 50% on processing fee for PSB Apna Vahan Sugam. | |||
| #Processing fee charged is With Effect from 1st Feb 2025. | |||
| Rates and charges as of 2nd April 2025. | |||
| Source: Paisabazaar.com | |||