Car Loan on On-Road Price: What Is and Isn't Funded
Does your car loan cover road tax, insurance, TCS, accessories and extended warranty? See what lenders fund in the on-road price and how much cash you need.
In this article (8 sections)
Most car loans fund a percentage of the on-road price, which normally means ex-showroom price, road tax, registration and insurance. Optional items such as accessories, extended warranty and service packages are funded only up to a cap, if at all, and TCS on cars above ₹10 lakh is a tax you usually pay from your own funds and claim back in your return. Ask for an itemised on-road quote and the lender's funding base before you book, so the down payment does not surprise you.
Figures and rules below are as of October 2026. Road tax and RTO fees vary by state, so treat the example as illustrative.
What makes up the on-road price
| Component | What it is | Usually funded? |
|---|---|---|
| Ex-showroom price | Car price including GST | Yes |
| Road tax | Lifetime or long-term tax set by your state | Yes, as part of on-road price |
| Registration and RTO fees | Registration, number plate and smart-card RC fees | Yes, as part of on-road price |
| Insurance | First-year own damage plus 3-year third-party cover for new cars | Yes, as part of on-road price |
| TCS (cars above ₹10 lakh) | 1% tax collected by the dealer | Varies; often paid by you |
| Accessories | Floor mats, music system, alloys, etc. | Only up to the lender's cap |
| Extended warranty, AMC, service packages | Optional add-ons | Only up to the cap, if at all |
| FASTag | Toll tag fitted at delivery | Small amount, often paid by you |
| Handling or "logistics" charges | Dealer add-on | Question it; ask for a written breakup |
Since GST changes effective 22 September 2025, small petrol cars (up to 1,200 cc) and small diesel cars (up to 1,500 cc), both up to 4 metres long, attract 18% GST, larger cars and SUVs 40%, and electric cars 5%. The earlier compensation cess on cars was removed. GST is already inside the ex-showroom figure.
How lenders decide the funding base
Lenders use one of two bases, and the difference can be lakhs:
- On-road funding. The loan is a percentage of the on-road price. SBI's New Car Loan page, for instance, advertises financing of up to 100% of the on-road price, which it says includes registration and insurance, subject to income-based limits. Its online auto loan page defines on-road cost as ex-showroom price plus road tax, insurance and registration, plus accessories or other miscellaneous expenses capped at ₹50,000 or 5% of the ex-showroom price, whichever is lower.
- Ex-showroom funding. Some lenders fund only a share of the ex-showroom price. Then road tax, insurance and registration all come from your pocket.
The percentage you actually get depends on your income, credit score, the car model and the lender's policy. Many lenders fund around 80% to 90%; the higher figures are for strong profiles and selected models. Our car loan guide covers rates, eligibility and tenure trade-offs.
Worked example: how much cash you need
Neha books a car with an ex-showroom price of ₹12,00,000. Her dealer's itemised quote (road tax, RTO and insurance figures illustrative):
| Item | Amount |
|---|---|
| Ex-showroom (incl. GST) | ₹12,00,000 |
| Road tax (state rate, illustrative 10%) | ₹1,20,000 |
| Registration and RTO fees | ₹8,000 |
| TCS at 1% (sale above ₹10 lakh) | ₹12,000 |
| Insurance (1-year OD + 3-year TP) | ₹48,000 |
| Accessories | ₹35,000 |
| Extended warranty | ₹25,000 |
| Total payable | ₹14,48,000 |
Her lender funds 90% of an eligible on-road price, caps accessories and add-ons at the lower of ₹50,000 or 5% of ex-showroom (₹60,000), and does not fund TCS:
- Accessories + warranty counted: ₹50,000 (not ₹60,000)
- Eligible on-road price: ₹12,00,000 + ₹1,20,000 + ₹8,000 + ₹48,000 + ₹50,000 = ₹14,26,000
- Loan at 90%: ₹12,83,400
- Neha's cash: ₹14,48,000 − ₹12,83,400 = ₹1,64,600
If her lender funded only 90% of the ex-showroom price, the loan would be ₹10,80,000 and her cash outlay would jump to ₹3,68,000.
At 9% for 5 years, the ₹12,83,400 loan has an EMI of about ₹26,641 and total interest of about ₹3,15,076. The ₹50,000 of accessories financed inside it costs roughly ₹12,275 in interest over the term. Check your own numbers on the EMI calculator.
TCS: a cost now, a credit later
When the sale consideration of a motor vehicle exceeds ₹10 lakh, the seller collects TCS at 1% of the whole amount, not just the part above ₹10 lakh. From 1 April 2026 this sits in Section 394 of the Income-tax Act, 2025 (old Section 206C(1F) of the 1961 Act). The TCS appears in your Form 26AS/AIS against your PAN and you can claim it as a credit when you file your return. Make sure the dealer has your correct PAN on the invoice.
Insurance, hypothecation and the RC
- Insurance. New cars must carry long-term third-party cover (three years). Lenders want comprehensive insurance with the lender named as hypothecatee for the loan period. You are free to compare insurers instead of accepting the dealer's quote; see third-party vs comprehensive car insurance.
- Hypothecation on the RC. The lender's charge is recorded on the registration certificate in VAHAN when the car is registered. Check the RC on the Parivahan portal or mParivahan app shows the correct lender name.
- After repayment. Collect the NOC and Form 35 from the lender, then apply to the RTO (online through Parivahan) to remove hypothecation.
Questions to ask before you book
- Is the loan based on on-road or ex-showroom price, and what percentage?
- Which items count in on-road price, and is there a cap on accessories, warranty or service packages?
- Is TCS included in the funded amount?
- Will the lender pay the dealer directly, and when is the first EMI due?
- What are the processing fee, documentation charges and foreclosure terms in the Key Facts Statement, and what is the APR?
- Can I buy insurance from an insurer of my choice?
What not to do
- Do not accept a single "on-road" number without an itemised breakup.
- Do not finance every add-on by default. Each rupee financed attracts interest for the full tenure.
- Do not pay booking or "loan processing" money to personal accounts or agents; pay only the dealer's or lender's official account against a receipt.
- Do not share OTPs with anyone claiming to speed up loan approval or RC transfer.
- Do not ignore the RC check. A wrong lender name or missing hypothecation can delay insurance claims or resale later.
Key takeaways
- On-road price usually means ex-showroom plus road tax, registration and insurance; optional add-ons are capped or excluded.
- Lenders differ: some fund a percentage of on-road price, others only of ex-showroom, which can change your cash need by lakhs.
- TCS of 1% applies when the sale value exceeds ₹10 lakh and is claimable in your tax return.
- Ask for an itemised quote and the lender's funding base in writing before you pay the booking amount.
- Financing accessories is convenient but adds interest for the full tenure.
Frequently asked questions
Does a car loan cover the full on-road price?
Some lenders finance a percentage of the on-road price, which includes ex-showroom price, road tax, registration and insurance, and a few advertise up to 100% for eligible borrowers. Others fund only a share of the ex-showroom price. Check the sanction letter for the base the lender uses.
Are accessories and extended warranty included in a car loan?
Sometimes, but usually with a cap. For example, SBI's online auto loan page counts accessories and other miscellaneous costs only up to ₹50,000 or 5% of the ex-showroom price, whichever is lower. Anything above the cap is paid from your own pocket.
Is TCS charged when buying a car above ₹10 lakh?
Yes. The seller collects TCS at 1% of the full sale consideration when it exceeds ₹10 lakh, now under Section 394 of the Income-tax Act, 2025 (old Section 206C(1F)). You can claim it as a credit against your income tax when filing your return.
Why does the lender's name appear on the RC?
The car is hypothecated to the lender as security, so the hypothecation is recorded on the registration certificate in VAHAN. After you repay, you collect the NOC and Form 35 from the lender and apply to the RTO to remove it.
Can I negotiate the on-road price?
Yes. Dealers often bundle accessories, extended warranty, insurance and handling charges. Ask for an itemised quote and buy optional items separately if they are cheaper; statutory items like road tax and registration fees are fixed by your state.
This article is for general education and is not personalised financial, tax or legal advice. Rates and rules are as of 29 Oct 2026; confirm current terms with your lender, AMC or a qualified adviser.
