Some dreams come on four wheels.
I remember the day I saw my father silently staring at a white sedan parked near our house. He said nothing, just smiled. That was the moment I decided — one day I would buy him a car. Years later, I did. But what no one talks about is what comes before that happy moment — the decisions, doubts, documents, and sometimes, the debt.
This article is not just about car loans. It's about everything that comes with owning a car in India — how to take the right loan, how to save tax while doing it, and why insurance is not just a formality.
Car Loan: More Than Just Monthly EMIs
Buying a car with a loan is the reality for most middle-class families today. But many people make decisions in excitement — and that’s where problems begin.
My Personal Experience:
When I bought my first car, I was working in my second job. My salary wasn’t huge, but I thought, “If I can manage ₹12,000 EMI, why wait?”
But I didn’t calculate fuel, servicing, insurance, and unexpected repairs. I missed one EMI during a medical emergency and had to pay a late fee. That affected my credit score.
So, before you say yes to that loan, ask yourself:
- Can I afford this EMI comfortably even during emergencies?
- Do I have 10–15% extra monthly income beyond fixed expenses?
- Will I be okay if fuel prices go up?
A loan is not just an approval. It’s a responsibility you carry every single month.
Choosing the Right Car Loan: Bank vs NBFC
There are many banks and non-banking institutions offering car loans. But don’t just look at the interest rate. Look deeper.
What to Check:
- Interest Type: Flat rate or reducing balance?
- Processing Fees: Sometimes hidden and non-refundable.
- Prepayment Charges: If you repay early, will they charge extra?
- Down Payment Flexibility: Some banks offer 100% funding — but it comes at a cost.
Practical Tip: Always compare at least 3 lenders. A difference of even 0.5% in interest can save you thousands over 5 years.
Down Payment: The More, The Better
Many people go for 100% finance because they want to keep cash in hand. But here’s the truth — the more you borrow, the more you pay in interest.
Example:
If you take ₹8 lakh as a loan at 9% for 5 years, you end up paying around ₹9.87 lakh in total — that’s ₹1.87 lakh just in interest.
Personal Suggestion: Try to pay at least 20–30% of the car’s cost upfront. It reduces EMIs and stress — both.
Can Car Loan Help You Save Tax?
Here comes the most misunderstood part. Car loans don’t offer tax benefits — unless you’re self-employed or using the car for business purposes.
Real Use Case:
One of my friends runs a photography business. He bought a car on loan and used it for his client visits. His CA showed depreciation and interest as business expenses — saving him a good amount in taxes.
Tip: If you're salaried, you can't claim tax deductions on a personal car loan. But if it’s a business vehicle, consult your CA to legally claim interest and depreciation.
Insurance: Not Just A Legal Rule, But A Lifeline
When I met with a minor accident in 2022, my front bumper was damaged badly. The cost? ₹28,000. But thanks to comprehensive insurance, I only paid ₹2,000.
Many people think third-party insurance is enough — because it’s cheap. But it only covers damage to others. Not your car. Not your family.
Two Main Types:
- Third-Party Only: Covers damage to others’ vehicles or property.
- Comprehensive: Covers both third-party and own damage.
Practical Suggestion: Always go for comprehensive insurance, even if it costs more. And read the policy terms — especially about deductibles, zero depreciation add-ons, and roadside assistance.
Hidden Costs That People Ignore
Owning a car is more than just the EMI. Let me list the things I didn’t calculate initially:
- Fuel expenses (they fluctuate a lot)
- Regular servicing
- Tyre replacement after 30,000–40,000 km
- Pollution check, road tax, FASTag recharge
- Parking fees, tolls, and unexpected fines
If your monthly EMI is ₹10,000, expect another ₹5,000–₹7,000 in running and maintenance.
My Honest Feedback After 4 Years of Car Ownership
I love my car. It gave me freedom. It gave me memories with my parents that no price can match. But it also taught me discipline, patience, and planning.
If I could go back, I would:
- Wait for one more year to save more down payment
- Take a slightly cheaper model
- Avoid accessories I didn’t really need
- And yes, read the fine print of the loan offer
Final Thought That Matters
Buying a car is not just about pride. It's about how prepared you are to carry its weight — financially and mentally. Don’t buy a car because others are. Buy it when you’re ready — not just emotionally, but practically too.
Make every EMI worth it.