Planning to buy a car this Diwali? Banks offer attractive rates on EV car loans

Besides their green quotient, EVs are also considered cost-effective in the long run as the cost of maintaining electric cars is lower compared to regular cars running on petrol or diesel.

Since EVs now come at various price points, affordability has improved. “Earlier, it was only at the higher end. Now with new model launches from Tata Motors and Mahindra Electric Mobility, electric cars have become more affordable,” says Sumit Bali, Group Executive & Head - Retail Lending and Payments, Axis Bank.

Here is a look at the financing terms laid out by the leading banks for EVs.

Banks offer concessional interest rates for EVs

Interest rates on loans for electric cars tend to be lower than those for regular cars by 10-30 basis points (bps) on an average (100 bps = 1 percentage point).

For instance, Bank of Baroda is offering concessional rate of interest of up to 0.25 percentage points for EVs to make it easier for car-buyers to ‘go green’. Similarly, SBI is offering concession of up to 0.20 percentage points on interest rates for electric cars across all category of customers and depending on the credit profile of applicants.

Interest rates are in the range of 7.95 percent to 8.30 percent for SBI Green Car Loans (for electric cars) against the interest rates for regular car loans, which is in the range of 7.85 percent to 8.65 percent.

The loan repayment tenure varies from lender to lender. For instance, at SBI, the minimum loan repayment period is three years, and maximum, eight years. Axis Bank is offering loans up to seven years. Most banks do not charge any prepayment fees on EV loans.

“The processing fee varies from 0.2 percent to 2 percent of the loan amount, depending on the lender,” says Adhil Shetty, CEO, BankBazaar.com. Some lenders may charge a flat fee instead, which is capped at Rs 5,000. He adds, during festive season, lenders may waive off the processing fees in some cases.

Tax sops to encourage EV purchases

With a view to encourage more people to buy EVs, the Government of India (GOI) has announced exclusive tax benefits. “You will get an additional income tax deduction of up to Rs 1.5 lakh on the interest paid on EV loans sourced between FY20 and FY23 under Section 80EEB of the Income Tax Act,” says Shetty. He adds, in addition, the GST on EVs has also been reduced to 5 percent from 12 percent compared to conventional vehicles which are levied 28 percent.

No change in eligibility criteria

The eligibility criteria for a car loan for an electric car is the same as for a conventional car. “The loan is available for both Individuals and non-individuals buying a car for personal/non-commercial uses,” says H. T. Solanki, General Manager – Mortgages & Other Retail Assets, Bank of Baroda.

SBI offers green car loans for electric cars to applicants in the age group of 21 to 67 years.

Similarly, at Axis Bank, loan for electric cars is available for both salaried and self-employed individuals and non-individuals, such as partnership firms, limited liability partnership firms, companies, Hindu Undivided Families/trusts and societies.

Loan margin and documentation

Most banks typically offer 75-100 percent of the cost of the vehicle as loan. “The loan margin varies based on the cost of the vehicle and the car model,” says Shetty.

For instance, Bank of Baroda offers EV car loans at a minimum margin of 10 percent of the on-road price of the car (i.e. ex-showroom price + registration fee + insurance cost). At Axis Bank, salaried applicants can get up to 85 percent of the on-road price of the car, while those who are self-employed can get up to 80 percent of the on-road price.

Bank of Baroda provides EV loan finance up to Rs 5 crore. At Union Bank of India, there is no upper ceiling on electric car loan.

“You will need to submit proof of age, income, identification, address, etc. Note that these criteria and documents may vary from lender to lender,” adds Shetty.