Buying a Car: Should You Pay With Cash if You Can? - Autotrader
For example, say you want to buy a $25,000 car and you can afford to purchase it with cash. If you want to spend your cash, that's great: It means you won't have a payment or another care about the car's financing. But let's say you shop around for a good interest rate and end up with 1 percent financing for 3 years after a $5,000 down payment.
In that case, you'll keep your leftover $20,000, and while you have a car payment, the total interest comes to just $300. The question you must ask yourself is whether it's worth $300 to have that $20,000 in your bank account rather than tied up in your car. Most people would rather have the money in the bank or invested, where it's likely that they'll quickly earn back the entirety of the loan's $300 cost.
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