Inputs
Investment returns are not guaranteed. Markets can fall, and can stay down for years. The return used here is an assumption, not a forecast; try lower ones to see how the answer changes.
How equity gains are taxed
- Held 12 months or less: short-term, taxed at 20% of the gain.
- Held longer: long-term, taxed at 12.5% of the gains above ₹1,25,000 in a year.
- Plus 4% cess on the tax. PPF interest is tax-free; FD and RD interest is taxed every year at your slab rate.
- This tool asks for your return after tax. For an equity fund held for years, that is lower than its return before tax: in the plot vs FD vs fund example, 10% a year before tax keeps about 9.1% a year after tax over 10 years. For a fixed deposit, it is the rate × (1 − your tax rate).
Filled in for you20% down payment over 5 years, processing fee and inflation
Verdict
Paying cash comes out ₹67,298 ahead after 5 years
That is ₹50,289 in today's rupees.
The loan only pays if your savings earn more than 9.67% a year after tax.
This answer uses an example price, fee and return. Put in yours to get your own answer.
- Pay cash₹11.82 lakh
- Take the loan₹11.15 lakh
- EMI
- ₹16,607
- Loan
- ₹8.00 lakh
- Interest over the loan
- ₹1.96 lakh
- Loan's true cost, with the fee
- 9.67%
Both buyers own the same car and spend the same each month.
Saved scenarios
What would flip the answer
Each line changes one input and holds the rest.
- Taking the loan wins if your return is above 9.67%Now: 7%
Not modelled: weigh these yourself
Show the workingEvery step of the sum, with the numbers above.
Show the chart and other returnsHow the gap changes month by month, and the answer if your return is 2 points lower or higher.
At other returns
Everything else as you entered it.
Show every monthThe full month-by-month table, with a CSV download.
How this works
The tool follows two buyers with the same money and the same car. The cash buyer pays the whole price today and then invests, every month, the EMI the other buyer pays. The loan buyer pays the down payment and the processing fee, invests the rest of the price, and pays the EMI. When the loan ends, both own the car and owe nothing, so the one with more invested is ahead.
Assumptions and sources
| Assumption | Value | Source | As of |
|---|---|---|---|
| Car loan interest rate | 9% | Project spec default for interest on the extra car price; user-editable | 2026-10-19 |
| Inflation | 6% | CapitalVerdict default assumption from project spec; user-editable, not a forecast | 2026-10-19 |
Questions
Why does the cash buyer invest the EMI?
So both buyers spend the same each month. The loan buyer's EMI goes to the bank; the cash buyer, who has no EMI, puts the same amount into savings. Without that, the comparison would favour whoever spends less.
What is the loan's true cost?
The yearly rate at which what you actually receive (the loan less the processing fee) equals the EMIs you pay. A fee makes it higher than the quoted rate. Your savings have to earn more than this, after tax, for the loan to come out ahead.
Is the car's resale value included?
It does not need to be. Both buyers own the same car, so its value at the end is the same on both sides and cancels out. To compare petrol, CNG and electric cars, use the car fuel tool.