Car Down Payment & On-Road Costs — What's Loanable

Most lenders cap car loan LTV (loan-to-value) at 80–85% of the on-road price for new cars, meaning a minimum down payment of 15–20%. For used cars the cap is lower — 70–75% LTV, so 25–30% down. A few banks offer 90–100% LTV financing on select new-car models during festive campaigns, but the rate is usually 25–50 bps higher than the standard product and is restricted to specific manufacturer tie-ups. The headline "100% financing" deals you see in dealer showrooms usually include the road tax and insurance in the financed amount, which technically still leaves you below 100% of the bare ex-showroom price.

Ex-showroom price is the manufacturer's price including GST and cess but excluding state-level taxes and registration charges. On-road price is what you actually pay to drive the car home — ex-showroom plus road tax (4–12% of ex-showroom depending on state and fuel type), registration fee (₹600–₹10,000), Tax Collected at Source (TCS) of 1% on vehicles above ₹10 lakh, basic insurance for the first year, fastag, handling charges, and any optional extended warranty or accessories. The on-road price typically runs 10–20% above ex-showroom, so a ₹10 lakh ex-showroom car is roughly ₹11.5–₹12 lakh on-road in a high-road-tax state like Karnataka or Maharashtra.

Lenders typically finance the ex-showroom price plus road tax, registration, and basic insurance (sometimes bundled by the dealer as "on-road financing"). What gets excluded: extended warranty packages (₹15,000–₹50,000), accessories (mats, body cover, premium audio, ceramic coating — ₹10,000–₹1 lakh+), dealer "handling charges" or "doc fees", and Tax Collected at Source (TCS) at 1% on the ex-showroom value above ₹10 lakh (claimable back at ITR filing). Many buyers underestimate these and discover only at delivery that they owe ₹50,000–₹2 lakh in cash on top of the down payment. Always ask the dealer for an itemised on-road quote in writing before signing the booking.

Three cases where a larger-than-minimum down payment makes sense: (1) car loans are fixed-rate and you have no prepayment benefit if you suddenly come into money mid-loan — front-loading the down payment is your only meaningful lever to reduce total interest, (2) the lower the financed amount, the easier the loan-to-EMI math against your income — for two-earner households or borrowers with other large EMIs, this matters, (3) you don't want to feel mentally committed to a 5-year EMI for what's essentially a depreciating asset. Three cases where keeping the down payment at the minimum makes sense: you have higher-return investments deployed (equity SIPs over 7+ years usually beat 9% car loan rates), you want to preserve liquidity for emergencies, or you're on a 3-year loan where interest cost is small in absolute terms anyway.

Yes, but the dealer margin on these is much smaller than on the car itself. Realistic outcomes: handling / documentation charges (₹3,000–₹15,000) can usually be reduced or absorbed during festive periods or month-end target push. Accessories carry the biggest dealer markup (often 30–50%) and are very negotiable — push hard or skip them entirely and buy from the aftermarket at 30–40% lower prices. Extended warranty packages can usually be negotiated by 10–20%. The car price itself, by contrast, has very little dealer margin in the entry-segment and mid-segment markets (₹5–₹20 lakh) — most savings here come from the manufacturer's scheme discounts that flow through the dealer, not from the dealer giving up margin.

Road tax (technically "motor vehicle tax") is a state-level levy. As of 2026, illustrative bands for petrol passenger cars (electric vehicles attract lower or zero road tax in most states): Maharashtra and Karnataka are at the top (10–13% of ex-showroom for cars above ₹10 lakh), Delhi NCR is mid (4–10% depending on fuel type and price), Tamil Nadu and West Bengal are similar (7–12%), and a few smaller states are lower. EVs typically attract 0–5% across most states. The result: the same ₹15 lakh ex-showroom car can have an on-road price difference of ₹1–₹2 lakh between a high-tax and a low-tax state, which is sometimes large enough to motivate registering the car in a different state through a relative — but the legality of inter-state registration arbitrage is borderline and the long-term registration / re-registration paperwork usually offsets the saving.

The booking deposit (usually ₹10,000–₹50,000) is technically refundable per dealer terms, but in practice dealers retain a "cancellation charge" of ₹2,000–₹10,000 and may delay the refund by 30–90 days. The larger down payment paid at the time of delivery is not at risk — it's paid only against the actual transfer of the vehicle. Cleanest practice: keep the booking deposit small, and don't pay the balance down payment until the car is physically ready for delivery and the dealer has issued the invoice.

Marginally. The car loan eligibility check primarily looks at your EMI-to-income ratio (typically capped at 40–50% of net monthly income, summed across all existing EMIs) and your credit score. A larger down payment reduces the loan amount, which reduces the EMI, which improves the ratio — useful at the margin if you are bumping against the cap. It doesn't materially help if your CIBIL score is below the lender's cutoff (usually 700–750) or if your income documentation is weak. The right move when approval odds are tight is to pull the credit report, fix any reporting errors, settle small overdue balances, wait 60 days, and reapply — rather than just throw more down payment at the application.