EV car loans now come at 5-25 bps lower interest rates than ICE vehicles, with waived processing fees and flexible terms. Urban salaried buyers with strong credit scores benefit most. Banks also align with ESG goals, while OEM-lender tie-ups enable subsidised rates and longer tenures.
To promote green mobility, banks are pricing their loans for four-wheeler electric vehicles (EV) at 5-25 basis points lower than their interest rates on internal combustion engine (ICE) car loans. Most lenders are waiving off processing fees, offering flexible payment options, including no prepayment charges on EV loans.
However, the interest rates of electric two-wheelers are higher than ICE two-wheelers due to concerns around battery life and resale value.
Banks are also offering special offers from time to time. For instance, marking the World Environment Day, Punjab National Bank announced a special push for green mobility by offering EV loans at interest rates starting from 8.30%, a 0.05% discount compared to traditional auto loans. The lender has also made the EV loan process more accessible through both digital channels through PNB One app.
Experts say the profile of EV customers is tilted towards urban, salaried with strong credit scores. This makes them lower-risk borrowers, and lenders are more comfortable offering better rates to them, especially for four-wheelers. This combination has helped in bringing down rates of loans for e-cars.
Moreover, interest rate concessions help lenders to align themselves with the broader clean and sustainable mobility goals of the government. The favourable pricing of EV loans also help lenders in implementing their stated ESG policies.
Adhil Shetty, CEO, BankBazaar.com, says EV manufacturers are partnering with lenders to offer subsidised interest rates and longer tenures. “These collaborations often include risk-sharing arrangements, making it easier for lenders to offer competitive rates. Some banks offer 60-month loans with preferential terms for EV buyers through such tie-ups,” he says.
Compare rates
As with any loans, the interest rate, processing fee, tenure and loan-to-value (LTV) ratio offered to an EV loan applicant can vary widely across lenders depending on their credit risk assessment policies. So, those planning to finance their EV purchases through loans should compare as many lenders as possible before making the final loan application.
Santosh Agarwal, CEO, Paisabazaar, says borrowers should first contact lenders with whom they maintain accounts or have availed loans or credit cards as lenders may offer preferential rates to their existing lenders. “Some lenders also offer pre-approved car loan offers to their existing customers with quicker sanction and disbursal,” she says.
Loan applicants should compare the interest rates offered by captive car finance companies, if available, as these may be lower. A borrower must keep in mind that a longer tenure means higher interest payouts. So keep the tenor as low as possible without compromising on your ability to repay your EMIs.
Look at tenure
Some lenders may offer shorter tenures for EV loans, resulting in higher EMIs. Make sure you are prepared to take on this burden with ease. Check if the rate is fixed or floating. Floating rates may benefit from future rate cuts but can also rise. Lenders that offer no penalty on prepayment or foreclosure should be preferred.
Check the documentation required to process the loan. Some lenders may demand additional paperwork for EV insurance, battery guarantee, or proof of subsidy eligibility. Some lenders, especially in tie-up with OEMs, may also include EV-specific insurance (e.g., battery protection).
As favourable government policies, improving charging infrastructure and growing environmental awareness lead to increased EV adoption, offering favourable rates for EV loans can help lenders to position themselves early in this growing segment.
Read more on The Financial Express
