An auto loan is simply the principle a buyer borrows from an institution to buy private or commercial vehicles, which they then pay back over a certain period at an interest rate. Buyers have been taking out loans to purchase vehicles for years now. Moreover, the trend to apply for loans to have an up-to-date car or bike to maintain their status in society is also on the rise.

Many Nepalese people usually have to take loans to buy vehicles. A 2021 report stated that the Nepalese population had taken over NRs.800 billion in bank loans to purchase vehicles in just the past five years. Further, as the price of bikes and cars are sure to rise in the future alongside the steep tax rate on motors, the principal capital of auto loans will inevitably go up as well.

As there is a rise in demand for auto loans, many banks, and financial institutions have rolled out their own schemes and offers to attract buyers. So, we are here to help you navigate your way to the best possible deal when taking an auto loan.

The Best Auto Loan In Nepal

auto loan bank

According to our research, the best place to take any type of loan is with a reputed bank. This is because banks tend to have a lower interest rate compared to other financial institutions. For example, the base rate of Everest Bank is 5.99% which is far less compared to the rate asked by finances.

However, when taking a loan, you must be careful about the floating rates. Some BFIs have a floating rates system that allows them to change the interest you pay them differently from the year prior. For example, Himalayan Bank Ltd. may charge you up to 5.00% more than their base rate of 9.49% pa.

Further, some banks take different interest rates depending on your loan period. As a result, two individuals’ principal payments may be the same, but their interest payments vary drastically depending on the tenure.

Downpayments And Minimum Salary


Although banks cover most of the finances when you buy a car or a bike, they do require you to pay a certain percentage of the price of the vehicle you’re buying. The sum of money you pay out of your own pocket is called a downpayment. All financial institutions require you to pay a portion of the total cost yourself while they will fill in with the remainder. For example, the Bank of Kathmandu will pay 50% of the quoted value, while you need to make a downpayment of the remaining 50%.

For an individual to be eligible for an auto loan, most banks don’t decide on the matter based on your income. So yes, your salary will determine your monthly payment to the financial institution each month, but it won’t hamper your auto loan eligibility. Moreover, most banks require you to be a salaried individual above the age of 20 for you to be eligible.

How Is Auto Loans Different For Electric Vehicles?

electric vehicle

The world is moving away from traditional fossil-fuel-run vehicles and opting for intelligent electric vehicles. Popular brands like Hyundai, Kia, and even Tesla are some of the electric cars that run on the streets of Nepal and have a certain percentage of the market under them. However, although e-vehicles are better for the environment, they are more expensive in contrast to petrol-run cars.

Moreover, Nepal is planning to switch to electric vehicles by 2031 to reduce the consumption of fossil fuels. As a result, the import of electric cars, bikes, and buses has increased significantly over the past few years. Further, the government has decided to tax EVs less than their fossil counterparts.

With the growing purchase of EVs, some banks have started to make separate provisions for electric vehicles. For example, Laxmi Bank pays up to 80% of the tax invoice of a new electric car or up to NPR 8,000,000.

Provision Of Auto Loan For Used Cars

People are usually skeptical about buying used cars as they could have several problems that the seller has not revealed. Similarly, banks and financial institutions are wary of taking the risk of providing loans for a used car. Many BFI’s refuse to approve loans for second-hand cars and bikes. However, a few commercial banks agree to lend money, but they do so only after a thorough examination of old vehicles by trusted service members.


When buying an old car, you may want to get it valued at a trustable place. Therefore, if you plan to get a loan for a used vehicle, you should always research which banks and finances are willing to lend you the sum. Some commercial banks of Nepal that provide loans for second-hand cars are Laxmi Bank, NIC Asia, Nabil Bank, and Sanima Bank.

Although the institutions provide you with the required money, the loan tenure is less than for a new vehicle. For example, at Sanima Bank, the maximum term for used motors is five years, whereas ten years for a new car.

Similarly, some banks even provide less financing for old vehicles compared to new ones. For example, Nabil Bank finances up to 70% of the cost of the VAT bill of the vehicle when it is new, but when it is used, it covers only up to 50% of the evaluated price.

Is Taking Auto Loan Beneficial?

auto loans

In just one word, yes! Picture this, you have a car you want to buy, but you lack the funds to do so. So you start saving up. But, unfortunately, by the time you have enough money saved up to buy that car, the model and brand may have become irrelevant by the time, and thus you’ll be filled with regret.

However, if you take an auto loan from a bank or finance, you can easily drive your dream car by the end of the month. Yes, you’ll be committed to paying a particular sum from your salary to the bank monthly for a few years to come. But, it is much better than the first scenario.

So, if you are planning on buying any type of car or bike, be it new or old, and find yourself lacking in funds to buy your dream vehicle, we recommend you contact a BFI and apply for a loan. Although it may seem like a hassle, it is much safer and easier to borrow money from a known bank than some loan sharks. However, we do recommend you to do your research and decide what’s best for you. Happy buying!