Cash vs Finance

People always think it is better to pay cash vs financing a vehicle. In some cases, that may be true, but it depends on the interest rate you can get vs the rate you can earn on that money.

Lets say you are earning 3.5% on your savings account. You can purchase a vehicle for $50,000 total including all taxes and fees. The interest rate on your 72 month loan is 5.99%.

If you left your money in the bank, you would earn $11,665.05 in compounded interest over 6 years. 

The interest you pay on the car loan is only $9,645.40

So, you would have a net gain of $2,019.65 if you borrowed the money vs paying cash.

“Just a little Lizzy the Owl Wisdom”