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New car loans are almost always cheaper. As of 2026, new-car rates from major lenders (HDFC, ICICI, SBI, Axis) typically sit in the 9.0%-10.5% range. Used-car rates run 11%-15% because used cars depreciate faster and have a higher repossession-loss risk for the lender.

Used-car loans also tend to cap at 5 years (vs 7 for new) and may require a larger down payment. Always shop the rate — a 1% difference on a ₹8 lakh / 5-year loan is roughly ₹20,000 in extra interest. Compare offers from at least 3 lenders before signing.

It depends on the rate type. RBI rules prohibit prepayment penalties on floating-rate retail loans, but most car loans are fixed-rate, where lenders can and do charge a foreclosure fee — typically 2-5% of the outstanding principal. Always read the loan agreement before signing.

Some lenders waive the prepayment charge if you've held the loan for a minimum period (often 12-24 months) or if you prepay below a certain percentage of the outstanding balance per year. If you anticipate prepayment, ask the lender to switch you to a floating-rate product or to include a no-prepayment-fee clause in the sanction letter.

Standard documents include:

• Identity proof — PAN card plus Aadhaar or passport
• Address proof — Aadhaar, utility bill, or rental agreement
• Income proof — last 3 months of salary slips and 6 months of bank statements for salaried applicants, or the last 2 years of ITRs plus bank statements for self-employed applicants
• Employment proof — appointment letter or employer ID for salaried, business registration for self-employed
• Vehicle quote — quotation or proforma invoice from the dealer for the chosen vehicle

Lenders may ask for additional documents based on your profile. Keeping digital copies handy speeds up the loan-approval workflow most lenders now use.

Yes, and significantly. A CIBIL score above 750 typically qualifies you for the lender's best advertised rate. A score of 700-749 will usually get you the standard rate. Below 700, the rate climbs steeply — sometimes 2-4% higher — and below 650 the application may be rejected outright or require a co-applicant or higher down payment.

Check your score for free on the CIBIL website before applying, and clear any pending dues 60-90 days before submitting the loan application to give the score time to update. A 50-point improvement in your CIBIL score can save tens of thousands in lifetime interest on a single car loan.