What you need to know
A used car costs less, but the loan is dearer: rates start about 2 percentage points higher, funding is based on valuation, tenure is shorter and fees are higher. Compare total cost, not just price.
Comparison
| Point | New car loan | Used car loan |
|---|---|---|
| Starting rate | 7.45% – 8.40% at major banks | About 9.45% (PNB floating) to 12.50%+ at NBFCs; SBI 10.45% – 15.60% |
| Funding | Up to 85% – 100% of on-road price | Usually 75% – 85% of valuation (PNB 75%, SBI 85%) |
| Tenure | Up to 7 years (8 at Axis, SBI Green) | Usually up to 5 years; car age + tenure capped (e.g. SBI 10 years) |
| Processing fee | Flat ₹500 – ₹8,500 or 0.25% – 0.5% | Higher — SBI 1.5% (max ₹10,000), BoB 0.5%, NBFCs up to 2.95% |
| Valuation | Invoice price | Lender’s valuer or IDV decides the value |
| Paperwork | Dealer invoice; new RC with hypothecation | RC transfer (Form 29/30) plus hypothecation (Form 34) |
A used car costs less upfront but the loan costs more per rupee. See used car loan rates and our new vs used guide.
Which is right for you
Advantages
- New: lowest rates, longest tenure, warranty, up to 100% funding at some banks
- Used: lower price and depreciation already taken; lower insurance premium
Limitations
- New: steep depreciation in the first years; higher upfront taxes
- Used: higher rate and fees, 75% – 85% funding, car-age limits, RC transfer paperwork
Frequently asked questions
Is it cheaper to buy a used car on a loan?
Often yes overall because the price is lower, even though the rate is higher — run both through the total cost calculator.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.