Car loan EMI is calculated using the formula: EMI = P × r × (1+r)^n / ((1+r)^n – 1), where P is the principal loan amount, r is the monthly interest rate, and n is the number of monthly installments. This ensures each payment covers both principal and interest in equal installments throughout the loan term.

Three primary factors determine your EMI: the loan amount (vehicle price minus down payment), the interest rate (based on your credit score and lender), and the loan tenure. A larger down payment reduces the principal and lowers your EMI. Choosing a shorter tenure increases EMI but reduces total interest paid.

A longer tenure lowers your monthly EMI but significantly increases the total interest paid over the life of the loan. For a $25,000 car loan at 7.5%, a 3-year tenure costs less in total interest than a 7-year tenure, even though the monthly payment is higher. Balance affordability with total cost when choosing your loan term.