Electric vehicles (EVs) are the future of transportation, offering a cleaner, more sustainable way to get around. However, the initial cost can be a roadblock for many potential buyers. This is where EV loans come in handy, providing the financial boost to make your EV dreams a reality.
But before you hit the gas pedal on a loan, here are some things to know.
The eligibility criteria for a car loan for an electric car is the same as for a conventional car. You will need to submit proof of age, income, identification, address, etc. Note that these criteria and documents may vary from lender to lender.
“Similar to regular cars, most banks typically offer 75-100 per cent of the cost of the vehicle as a loan. The margin varies based on the cost of the vehicle and the make,” says Adhil Shetty, CEO, BankBaazar.
With a view to encourage more people to buy electric vehicles, the Government of India announced exclusive tax benefits for the purchase of such cars. You can 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, 1961. However, no such tax benefits exist now.
The SBI Green Car loan provides a concession of 25 basis points (bps) in the applicable interest rate for regular car loans across all customer categories. Similarly, Bank of Maharashtra also provides a 25 bps concession when you take a loan for an electric vehicle.
“On average, the interest on loans for electric cars tends to be lesser than those for regular cars by 10-30 bps,” says Shetty.
Interest rates and associated fees play a pivotal role in determining the overall cost of an EV loan. It is advisable to conduct a comprehensive comparison of interest rates and processing fees offered by different lenders. Seeking out lenders with a proven track record in financing electric vehicles is beneficial, as they may present more competitive rates and favourable terms for borrowers.
Consideration of running costs and maintenance expenses is crucial in the evaluation of the financial feasibility of an electric vehicle. While EVs generally boast of lower running costs due to the affordability of electricity compared to gasoline, it's essential to factor in potential maintenance expenses. Certain models might incur higher maintenance costs, and buyers should weigh these against the savings on fuel.
Before committing to an EV loan, calculating the estimated monthly instalments (EMIs) is important. This involves an assessment of loan repayment terms. Ensuring that the monthly EMIs align comfortably with one's budget is essential to prevent a financial strain. It is crucial not to overextend oneself financially during the loan repayment period.