1. You usually pay part and borrow the rest
The lender finances an eligible share of the purchase or on-road cost and you fund the remaining down payment or margin.
Tip: Vehicle price and loan amount are not always the same.
2. The vehicle normally secures the loan
Hypothecation allows you to possess and use the vehicle while the lender retains a security interest until the loan is repaid and formally released.
Tip: Driving the vehicle does not remove the lender's security interest.
3. EMI is only part of vehicle cost
Insurance, fuel or charging, maintenance, parking, taxes and repairs belong in the same affordability calculation.
Tip: Budget for the vehicle, not just the EMI.
4. Closure requires hypothecation removal
After full repayment, collect closure documents and complete removal of the lender's interest from the vehicle registration record.
Tip: Loan closure and record cleanup are separate steps.
5. Quick check
Car price ₹12 lakh, loan ₹9 lakh. What is the ₹3 lakh difference?
Answer: B - The borrower funds the unfinanced part of the purchase.