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The Reserve Bank of India (RBI) has provided significant relief to car loan borrowers by cutting the repo rate by 0.25%. Following the reduction in interest rates, the EMIs (Equated Monthly Installments) for auto loans of ₹10 lakh, ₹15 lakh, and ₹20 lakh have now decreased.
Car Loans Become Cheaper After RBI Rate Cut
New Delhi: The Reserve Bank of India (RBI) has announced a 0.25 percent reduction in the repo rate, providing significant relief to the general public before the new year. The biggest impact of this decision will be on car loan EMIs, as a decrease in the repo rate directly leads to lower interest rates offered by banks. The repo rate has already been reduced several times in February, April, and June of 2025, and this is the fourth time the RBI has taken steps to make auto loans more affordable. This will provide relief to those who are already paying car loan EMIs and also to those planning to buy a new car.
According to information available on the State Bank of India (SBI) website, the minimum interest rate for car loans was 8.75 percent until October 13, 2025. Now, after the RBI's 0.25% repo rate cut, the car loan interest rate has decreased to 8.50 percent. This change in interest rate directly affects the EMI. The lower the interest rate, the lower the EMI meaning a lighter monthly burden for consumers.
While the difference in EMI reduction may only be a few hundred rupees, this saving becomes substantial over the long term of the loan. This relief is especially important for those whose budgets are already under pressure from inflation and rising costs.
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If a customer has taken a car loan of ₹10 lakh with a tenure of 5 years, the EMI at the old interest rate of 8.75 percent was ₹20,673 per month. After the new interest rate of 8.50 percent is applied, the EMI will decrease to ₹20,517. This means a saving of approximately ₹120 per month. Although this amount may seem small, the total savings over five years will be considerable.
For a ₹15 lakh car loan, the EMI was previously ₹30,956, which will now decrease to ₹30,775 after the interest rate reduction. This means consumers will get a relief of Rs 181 every month. This change is beneficial for middle-class families who buy cars while managing the burden of EMIs.
On a Rs 20 lakh loan, the EMI was previously Rs 41,274, but according to the new rates, the EMI has become Rs 41,033. This results in a direct saving of Rs 241 every month. The impact of the reduction in interest rates is even more significant on larger loans. Therefore, customers buying high-end cars will receive the most relief.
RBI cuts repo rate by 25 bps to 5.25%; Markets expect cheaper credit
The repo rate cut is not limited to just reducing EMIs; it also signals that the central bank is moving towards making loans cheaper in line with inflation and economic conditions. Lower interest rates encourage spending in the market, which also gives a boost to the automobile sector. This decision could increase car sales in the coming months and help provide financial stability to customers.
