Car Loan vs Cash Calculator
Compare paying cash for a car against taking a loan and investing the cash, using the loan interest and the investment return.
Enter your numbers
Example: 845000
Example: 168000
Example: 9.5
Example: 60
Example: 8.5
Recent
Formula
How the calculation works
The calculator first works out how much you would borrow by subtracting the down payment from the car price.
It builds the monthly instalment from the loan rate and term, then totals the interest you would hand to the bank over the whole period.
It grows the same borrowed amount at your investment return for the same months and compares that growth with the interest to judge which route leaves you ahead.
Common mistakes
- Comparing the total interest with the full investment growth but forgetting that the monthly instalments themselves reduce the cash you can keep invested.
- Using a headline investment return that is not realistically achievable after tax and fees, which makes the loan look far better than it is.
When to use it
- Use it when a dealer offers either a cash discount or low cost finance and you want to see which is worth more.
- Do not use it if you would spend the cash rather than invest it, because then the loan has no offsetting return.
Worked example
A car priced 845,000 with 168,000 down at 9.5 percent over 60 months gives a monthly payment of 14,218.26, total interest of 176,095.61, investment growth of 356,982.50 and a net advantage of 180,886.90.
Common questions
What does the net advantage mean?
It is the investment growth on the cash you did not spend minus the loan interest, so a positive figure favours the loan and a negative one favours paying cash.
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