Car Loans Are Cheaper Now, So Is This The Right Quarter To Buy A New Car?

For anyone planning to buy a car, one question always dominates the thoughts right now - Are low interest rates finally making car loans affordable again? With borrowing costs easing in early 2026 and

dealerships pushing year-end deals, this quarter, January to March, looks tempting. But is it really the right time to sign that loan agreement, especially when many still remember the unbelievably cheap car loans of the pandemic years?

Car loan interest rates today are lower than they were during the high-inflation phase of 2023-24, thanks to cooling prices and central banks easing policy. In India, recent repo rate cuts by the RBI, bringing the benchmark rate down to 5.25% by December 2025, have helped banks reduce lending rates. As a result, some public sector banks are now offering new car loans starting as low as 7.4–7.55%, while private lenders and NBFCs typically quote between 8.7% and 9.85% for borrowers with good credit scores.

This is a meaningful improvement, but it’s important to set expectations. These rates are not as low as the pandemic era. During 2020-2021, automakers and banks were desperate to revive demand. Zero-percent or 1-2% financing schemes were common, especially in markets like the US, where rates dipped below 3% for top-tier borrowers. Those were extraordinary times, and experts agree they are unlikely to return anytime soon.

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January to March is traditionally one of the best periods to buy a car. Dealers are keen to close the financial year on a strong note, clear older inventory, and meet sales targets. This often translates into better negotiations, cash discounts, free insurance, extended warranties or complimentary accessories. When these benefits are combined with lower interest rates, the overall cost of ownership can drop meaningfully, even if headline loan rates aren’t at historic lows.

However, buyers should remain practical. While interest rates are easing, car prices are still high compared to pre-pandemic levels. A small reduction in loan rates doesn’t dramatically cut monthly EMIs. For example, a modest rate drop may save only a few hundred rupees a month, not thousands.

So what’s the approach?

If you have a stable income, a good credit score (700+), and enough savings for a healthy down payment, this quarter makes sense, especially if you secure strong dealer discounts. Financial advisors still recommend the 20/4/10 rule: put down at least 20%, keep the loan tenure under four years, and ensure total car expenses stay within 10% of your income.

In short, car loans are cheaper, deals are better, and inventory pressure is real. While we may never see pandemic-level financing again, this quarter offers one of the most balanced opportunities in recent years, as long as you buy smart, not rushed.