Buying a New Car in 2026? A Complete Guide to RTO Fees and Loan EMIs

Buying a new car is one of the most exciting milestones for any household. The fantasy feels real: finally getting the car you’ve researched for months, driving home with new car smell, those pristine leather seats. But then comes the shock that stops many first-time car buyers in their tracks.

You’ve selected a car with an advertised “Ex-Showroom Price” of ₹8 lakh. You think to yourself, “I’ll finance ₹6.5 lakh, pay ₹1.5 lakh down, and my EMI will be manageable.” You visit the dealership confident in your numbers.

The finance manager slides across a sheet showing “On-Road Price”: ₹9.1 lakh. The gap between what you expected and what you must pay is ₹1.1 lakh. That’s 13.75% more than the advertised price. Where did that money go? Road tax, registration, insurance, hypothecation, FastTag, documentation fees—a dozen charges you didn’t anticipate.

Suddenly your ₹6.5 lakh loan plan becomes ₹7.6 lakh. Your EMI that should have been ₹15,000 monthly is now ₹17,800. The car that fit your budget three hours ago now doesn’t.

This scenario happens to thousands of Indian car buyers annually. In 2026, with shifting RTO slabs across states, the rise of BH-series registration options, and fluctuating interest rates ranging from 8.6% to 13.8%, planning is more critical than ever. The gap between understanding these costs and being blindsided by them can be ₹2-3 lakh in total cost difference.

This guide breaks down every mandatory charge so you can drive home your dream car without financial stress or surprise budget shocks.

Understanding the RTO Breakdown: The Biggest Variable in Your Car’s Price

The Regional Transport Office (RTO) charges are the single biggest variable component in your car’s final price. Unlike the ex-showroom price (which is fixed by the manufacturer), RTO charges depend entirely on your state of registration. And the variation is massive.

Road Tax: The Lifetime Cost Paid Upfront

Road tax is a state-level tax you pay once when registering your car. It’s calculated as a percentage of your car’s ex-showroom value, and the percentage varies dramatically by state and vehicle category.

In Delhi, road tax on a petrol car under ₹10 lakh is approximately 4%. On the same car in Kerala, it’s 15-20%. That’s a five-fold difference for the identical vehicle in different states.

Here’s the actual state-by-state breakdown as of 2026:

Karnataka: 13% for petrol cars up to ₹6 lakh, 18% for ₹6-10 lakh bracket. Electric vehicles registered up to ₹15 lakh are exempt from road tax entirely. This is one reason you see high EV adoption in Karnataka—the government is aggressively incentivizing it through tax elimination.

Maharashtra: 14-18% for petrol/diesel cars depending on price bracket. Hybrids get a reduction (10-12%). EVs at 5%. If you’re buying in Mumbai, expect to pay roughly 16% of your car’s ex-showroom price as road tax.

Tamil Nadu: Implemented a simplified uniform 12% slab across most categories (a change from previous tiered structure). Hybrids get 2% discount. EVs: 6%. The uniformity makes planning easier for Tamil Nadu buyers—no need to worry about price-bracket nuances.

Delhi NCR: Petrol/diesel cars: 15% (revised upward in 2025). EVs: completely exempt till December 2026. This is a major incentive—an EV buyer in Delhi saves 15% on road tax compared to a petrol car.

Gujarat: Tiered approach: 6-8% for petrol cars under ₹10 lakh, 8-10% for higher brackets. EVs: 4-5%. Relatively reasonable rates compared to Kerala or Maharashtra.

Kerala: Maintains one of India’s highest road tax rates. 15-20% depending on vehicle category and price. A ₹10 lakh car in Kerala costs ₹1.5-2 lakh in road tax alone. This is why Kerala has lower car penetration per capita—the tax burden is substantial.

Uttar Pradesh: 12-16% depending on fuel type and price bracket. SUVs above ₹12 lakh faced increases in 2025.

Real Impact: Road Tax on Three Car Models

Maruti Swift (Petrol, ₹8 lakh ex-showroom):

In Karnataka (13%): ₹1.04 lakh road tax

In Maharashtra (16%): ₹1.28 lakh road tax

In Kerala (20%): ₹1.60 lakh road tax

In Delhi (15%): ₹1.20 lakh road tax

Difference between lowest (Karnataka) and highest (Kerala): ₹56,000. That’s seven months of car fuel costs. Same car, same capability, radically different on-road price purely based on state.

Hyundai Creta (Petrol, ₹12 lakh ex-showroom):

In Karnataka (18%): ₹2.16 lakh road tax

In Tamil Nadu (12%): ₹1.44 lakh road tax

In Gujarat (10%): ₹1.20 lakh road tax

Difference: ₹96,000 between Gujarat and Karnataka. This difference often makes the decision between whether the car is affordable or out-of-budget.

Registration Fees and Hypothecation Charges

Beyond road tax, there are additional RTO charges:

RC Registration Certificate Fee: ₹500-1,000 depending on the state. This is a one-time fee for your registration certificate and smart card RC.

Hypothecation Charge: If you’re financing the car with a loan (which most buyers are), the RTO charges approximately ₹1,500 to add the bank’s name to your registration. This makes the bank a “hypothecated party”—they hold a legal interest in the car until the loan is repaid. If you default, the bank can legally seize the vehicle.

These fees are relatively small compared to road tax, but they add to the total on-road cost.

BH Series Registration: A Significant Option for Transferable Jobs

If you have a job requiring frequent interstate transfers (government services, consulting, multinational companies), or if you anticipate moving states in the next 5-10 years, the BH (Bharat) Series registration offers a fundamentally different and often cheaper approach to car ownership.

How BH Registration Works:

Instead of paying road tax in one lump sum upfront (for 15 years of vehicle ownership), BH registration allows you to pay road tax in 2-year installments. So instead of paying ₹1.8 lakh upfront (on a ₹10 lakh car in an 18% tax state), you pay ₹1.8 lakh ÷ 7.5 installments = ₹240,000 every 2 years.

More significantly, if you transfer your car to a different state (say, you move from Karnataka to Maharashtra for a job), you don’t have to re-register and pay a new state’s road tax. Your BH registration remains valid across all states. You simply renew the 2-year tax installment—and the tax rate used is the BH rate, which is often lower than normal state rates.

Real Savings Example:

A Bangalore professional buys a ₹12 lakh car. Using normal registration, they pay 18% road tax = ₹2.16 lakh upfront. Later, they move to Mumbai for a new job. They must re-register the car in Maharashtra, paying Maharashtra’s 16% tax on ₹12 lakh = ₹1.92 lakh. Total tax paid: ₹4.08 lakh over 7 years of ownership (one upfront payment in Karnataka, one in Maharashtra).

Using BH registration, they pay 10% BH tax every 2 years. Over 7 years (3.5 installments), they pay 10% × 3.5 = 35% in total tax = ₹4.20 lakh. Sounds similar, but here’s the key: they can move to Mumbai, stay there 2+ years, and when they sell the car, the next owner can register it in their state using the same BH registration. They never face the re-registration tax hit.

Users report saving ₹1.6-1.7 lakh with BH registration compared to normal registration when including avoided re-registration costs.

BH Series Eligibility: Government employees with transfer policies, professionals with job flexibility, business owners with multi-state operations. You apply through your dealership during purchase, and the Vahan portal processes the application.

For accurate RTO calculation specific to your state and car model, use a motor vehicle tax calculator that accounts for current state slabs, fuel type, and vehicle price bracket. This eliminates guesswork and prevents choosing a car thinking it’s affordable, then discovering RTO charges make it unaffordable.

The Real Cost of Financing: Loan EMIs and the 20-4-10 Rule

Once you know the on-road price of your chosen car, financing enters the picture. And this is where most first-time buyers make costly decisions.

Current Interest Rates and EMI Reality

As of January 2026, car loan interest rates in India range from 8.6% (State Bank of India) to 13.8% (Axis Bank for applicants with lower credit scores). Most mainstream banks (HDFC, ICICI, Canara) are in the 8.9%-11% range.

Your actual rate depends on: credit score (740+ gets best rates), income stability, down payment size, loan tenure chosen, and whether you’re a salaried employee (lower risk) or self-employed (higher risk).

Here’s what EMI means in real money. On a ₹8 lakh car loan:

At 9% interest over 4 years: Monthly EMI = ₹18,640. Total interest paid over 4 years = ₹1.76 lakh. Total amount repaid = ₹9.76 lakh.

At 9% interest over 5 years: Monthly EMI = ₹15,260. Total interest paid = ₹2.56 lakh. Total amount repaid = ₹10.56 lakh.

At 9% interest over 7 years: Monthly EMI = ₹12,050. Total interest paid = ₹4.14 lakh. Total amount repaid = ₹12.14 lakh.

Notice the trap: extending from 4 years to 7 years reduces your monthly payment from ₹18,640 to ₹12,050 (a 35% reduction, which feels huge), but you pay an extra ₹2.38 lakh in total interest (₹4.14L minus ₹1.76L). That’s 135% more interest paid for the convenience of 35% lower monthly payment.

Most dealerships push 6-7 year loans because it makes cars “more affordable” on a monthly basis. But that affordability costs you substantially over the loan duration.

The 20-4-10 Rule: Financial Safeguard

To keep your finances healthy and prevent car loans from derailing your other financial goals, financial advisors recommend the 20-4-10 rule:

20% Down Payment: Pay at least 20% of the on-road price upfront. If your target car’s on-road price is ₹10 lakh, put down ₹2 lakh minimum. This reduces the loan amount, lowers monthly EMI, and minimizes total interest paid.

4-Year Loan Tenure: Limit financing to 48 months. This ensures you pay off the vehicle before it depreciates significantly (cars typically depreciate 15-20% in year 1, then 10% annually thereafter). A 7-year loan means you’re paying for the car years 4-7 when it’s worth significantly less than the amount owed—this creates “negative equity” (owing more than the car’s worth).

10% Monthly Income Cap: Your total monthly car expenses (EMI + fuel + insurance + maintenance) should not exceed 10% of your take-home monthly income. This ensures the car doesn’t squeeze your budget for other essentials.

Applying the 20-4-10 Rule: Real Example

Your take-home monthly income: ₹1,00,000

Maximum 10% car budget: ₹10,000 per month

Assuming: fuel costs ₹3,000, insurance ₹600, maintenance ₹500 = ₹4,100 non-EMI costs

Available for EMI: ₹10,000 – ₹4,100 = ₹5,900

At 9.5% interest over 4 years, an EMI of ₹5,900 supports a loan of approximately ₹2.8 lakh.

Add 20% down payment requirement: if you’re putting ₹70,000 down (20%), your car budget is ₹2.8L + ₹0.7L = ₹3.5 lakh on-road price.

This seems low compared to the ₹8-10 lakh cars advertised everywhere. And it is. But it’s the budget that keeps you financially healthy. Stretching beyond this means either reducing other expenses dramatically or taking on debt you can’t comfortably service.

Most buyers violate the 10% rule. They see a ₹8 lakh car, put down ₹1 lakh, and finance ₹7 lakh for 6 years, bringing their monthly EMI to ₹13,000. With fuel and insurance, that’s ₹16,500 monthly—16.5% of their income. They manage it for the first year, but when an unexpected medical expense or job loss occurs, they struggle to keep up EMI payments.

Using a Car Loan EMI Calculator

Before visiting the dealership, run multiple scenarios through a car loan EMI calculator. This tool shows you exactly what different loan amounts, interest rates, and tenures mean for your monthly cash flow and total interest cost.

Input: ₹8 lakh loan, 9.5% interest, 4 years → Shows: ₹18,850 monthly EMI, ₹1.84 lakh total interest.

Input: ₹8 lakh loan, 9.5% interest, 6 years → Shows: ₹14,070 monthly EMI, ₹2.10 lakh total interest.

Immediately, you see that choosing 6 years over 4 years saves ₹4,780 monthly but costs an extra ₹260,000 in interest over the loan life. That trade-off is almost never worth it.

Most dealership finance managers won’t show you this comparison. They’ll present the 6-year option because it “makes the car affordable.” You need to calculate it yourself to see the true cost.

Hidden Costs Nobody Emphasizes Enough

TCS: Tax Collected at Source for Cars Above ₹10 Lakh

If your car’s ex-showroom price exceeds ₹10 lakh, the government mandates TCS (Tax Collected at Source) collection. The car dealer must collect 1% of the ex-showroom price from you and deposit it directly with the government under your PAN.

For a ₹15 lakh car, the dealer collects ₹15,000 as TCS. This is added to your bill.

The crucial point: TCS is NOT an additional tax. It’s advance tax. You’re paying tax upfront that you’d owe anyway when filing your annual income tax return. When you file your ITR next year, this ₹15,000 TCS amount appears on your Form 26AS and gets credited against your total tax liability. If you owe more tax than the TCS collected, the government takes additional tax. If the TCS exceeds your tax liability, you receive a refund.

However, here’s the practical frustration: you pay ₹15,000 at the dealership, but you get the refund (if applicable) only after filing your tax return and processing it—possibly 6-12 months later. During those months, the money is with the government earning no interest.

For high-net-worth individuals, this is minimal friction. For middle-class car buyers, it’s a cash flow hit worth noting.

Action item: When the dealer shows you the bill, ensure TCS is listed separately. Request Form 27D, which is the certificate proving TCS has been collected and will be deposited with the government. Keep this for your tax records.

Comprehensive Car Insurance: 2-3% of Car Value Annually

Comprehensive car insurance is not optional legally (you must have third-party coverage), but comprehensive coverage (covering your own car damage, not just third-party liability) is what protects you fully.

Premium depends on: car model, engine size, age of car, registration location, and add-ons selected. Typical comprehensive car insurance costs:

Cars up to 1,000cc: ₹2,094-3,500 annually (for third-party only) or ₹6,500-8,000 (comprehensive)

1,000-1,500cc: ₹3,416-6,521 annually (range depending on coverage type)

Above 1,500cc: ₹7,897-24,596 annually depending on coverage and engine size

For an ₹8 lakh Maruti Swift (under 1,200cc), comprehensive insurance costs roughly ₹8,000 annually. That’s 1% of the car’s value yearly. For a ₹15 lakh Hyundai Creta, comprehensive insurance costs ₹12,000-15,000 annually—also roughly 1% of car value.

What comprehensive coverage includes:

Own damage coverage: Repairs if you damage the car in an accident, fire, theft, flood, or natural calamity.

Third-party liability: If you damage another vehicle, property, or injure someone, the insurance pays up to statutory limits (₹7.5 lakh for third-party property damage).

Personal accident cover: Up to ₹15 lakh coverage if you die or are permanently disabled in an accident.

No Claim Bonus (NCB): If you go a full year without a claim, your next year’s premium gets a discount (20% after 1 year, 50% after 5 years).

For a ₹8 lakh car financed over 4 years, your annual comprehensive insurance cost is roughly ₹8,000. Over 4 years, that’s ₹32,000 in insurance costs on top of your EMI and other expenses. This must be factored into your 10% monthly income cap.

FastTag and Logistics Charges

Every new car needs a FastTag (electronic toll payment system) installed on the windshield. Cost: ₹200-300. This is mandatory for highway driving in India.

Vehicle logistics from dealership lot to your home (if the dealership doesn’t deliver): ₹5,000-10,000 depending on distance. Most dealerships include this in the on-road price, but confirm.

The Complete On-Road Price Calculation

Let’s walk through a complete car purchase to show how all these costs accumulate:

Car chosen: Maruti Swift (Petrol, base variant)

Ex-showroom price: ₹7.85 lakh

State: Karnataka

Cost Breakdown:

Ex-showroom price: ₹7,85,000

Road tax (13%): ₹1,02,050

Registration fee (RC + smart card): ₹1,000

Hypothecation charge (loan registration): ₹1,500

Insurance premium (annual, comprehensive): ₹8,000

FastTag: ₹300

Documentation/processing fee: ₹2,000

Total On-Road Price: ₹9,00,000 (approximately)

Difference between ex-showroom (₹7.85L) and on-road (₹9L): ₹1,15,000 (14.6% additional)

Financing Decision Using 20-4-10:

20% down payment: ₹1,80,000 (20% of ₹9L on-road price)

Loan amount: ₹7,20,000

At 9.5% interest for 4 years: EMI = ₹16,800 monthly

Total interest over 4 years: ₹1,33,000

Total amount repaid: ₹8,53,000 (₹7.2L principal + ₹1.33L interest)

Annual fuel cost (assuming 15 km/liter, 15,000 km annually, ₹110/liter): ₹1,10,000

Monthly fuel cost: ₹9,166

Monthly insurance: ₹667

Monthly maintenance: ₹1,000 (average)

Total Monthly Car Cost:

EMI (₹16,800) + Fuel (₹9,166) + Insurance (₹667) + Maintenance (₹1,000) = ₹27,633

Income Requirement for 10% Rule:

₹27,633 represents 10% of income, so required monthly income = ₹2,76,330

Or in take-home terms (assuming 30% tax, 12% EPF, etc.), gross salary needed ≈ ₹4,00,000

This is the real affordability metric. The car is truly affordable only if your monthly household income is ₹4 lakh or more.

Strategic Decisions: Negotiating Your Best Deal

Armed with understanding of RTO charges, loan EMIs, and hidden costs, you can now negotiate effectively with dealerships.

1. Calculate Before Visiting

Use the motor vehicle tax calculator to know your exact RTO charges before stepping into the showroom. When the dealership gives you an on-road price that differs from your calculation, ask why. Dealerships sometimes inflate on-road prices by including unnecessary add-ons or inflated documentation fees.

2. Negotiate Down Payment and EMI Separately

Dealerships often tie down payment and EMI together (“Put ₹1.5 lakh down and your EMI will be ₹19,000”). Instead, negotiate the on-road price first, then independently calculate the down payment you’re comfortable with and the loan tenure that minimizes interest.

If you have ₹2.5 lakh available for down payment, putting only ₹1.5 lakh is a choice, not a necessity. The extra ₹1 lakh down payment reduces your loan amount by ₹1 lakh, reducing your EMI and total interest paid.

3. Shop for Loan Rates

Don’t accept the first loan offer. Your bank, your credit union, or NBFC lenders might offer 0.5-1% better rates than dealer finance partners. That 0.5% difference on an ₹8 lakh loan saves ₹40,000 in total interest over 4 years.

4. Consider BH Registration If Eligible

If you anticipate job transfers or multi-state living in the next 5-10 years, BH registration saves ₹1.6-1.7 lakh in total taxes and transfer costs. Ask your dealership about BH registration availability and process. Not all dealerships actively promote it, but most can facilitate it.

The Complete Picture: Your Car Affordability

The car you can afford isn’t the most expensive on-road price you can finance. It’s the car whose total monthly cost (EMI + insurance + fuel + maintenance) stays within 10% of your monthly take-home income while maintaining a 20% down payment and 4-year loan tenure.

This discipline feels restrictive compared to dealer pitches promising 7-year loans and 100% on-road funding. But it’s the difference between car ownership that enhances your life and car debt that constrains it for years.

Before walking into a dealership, run the numbers. Use the motor vehicle tax calculator for your state and car model. Use the car loan EMI calculator for multiple tenure scenarios. Understand the total cost of ownership, not just the monthly payment. Know your budget’s ceiling. Negotiate from a position of information, not emotion.

The car will still be exciting to drive home. But knowing you afforded it wisely makes the entire experience infinitely better.