Buying a Car: Cash vs. Loan

Many people finance the purchase of a car with an auto loan, while others save money for the purchase and then pay cash. Let's compare the total cost of the car by these two methods. We'll need to know the following amounts: The cost of the car, the interest rate charged by the dealer or bank for financing the purchase of the car, and the number of years of financing. For the alternative method of saving before purchasing the car, we'll also have to know the interest rate that your savings can earn (usually less than the interest rate charged by the bank for loans), and how many years you will save before purchasing the car. In our applet below you can vary these entries to account for different scenarios.

Cost of car = $ Interest rate of the loan (annual % rate) = Number of years you will finance = Interest rate for savings account (annual % rate) = Number of years you'll save before purchasing car =

Monthly loan payment =

Monthly saving amount =

$ (Total cost of loan)

- $ (Total cost of savings)

---

Additional cost to finance = $

OK Clear