Cash vs. finance calculator
Put the cost of borrowing next to the value of keeping your cash.
Your numbers
Based on the assumptions you enter.
- Cash price today
- $35,000.00
- Present value of loan payments
- $37,250.07
- Finance monthly payment
- $684.82
- Loan interest (undiscounted)
- $6,088.91
Opportunity return is an uncertain after-tax assumption. Discounted costs are in today’s dollars. No taxes, rebates, down payment or financing fees modeled.
Your options, side by side
| Option | Monthly payment | Total interest | Total cost |
|---|
Your path to paid off
Remaining loan balanceWhere your money goes
Monthly amortization
Unrounded calculation; values displayed to cents| Month | Payment | Principal | Interest | Balance |
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Understand the numbers
How this calculator works
Paying cash avoids interest but uses money you could otherwise hold or invest. This calculator discounts each loan payment using your assumed after-tax annual return, converted to an effective monthly rate. It compares the present value of those payments with paying the same price today. The assumed return is not guaranteed; liquidity and risk matter beyond this calculation. No down payment or financing-only discount is assumed.
A worked example
A $35,000 cash price and a 6.5% loan for 60 months produce a fixed stream of payments. Discounting at an assumed 4% after-tax return gives a way to compare that stream with cash today. Lower the return assumption to see how sensitive the decision is.
The formula, in plain sight
Monthly opportunity rate d = (1 + annual return)^(1/12) − 1. Present value of financing = sum(payment ÷ (1 + d)^month). Cash advantage = present value of loan payments − cash price. A positive value favors cash on this model.
Keep your comparison going
Learn more from the Consumer Financial Protection Bureau’s auto loan resources. Confirm contract details with your lender.
Frequently asked questions about cash vs. finance
Is it better to pay cash or finance a car?
It depends on the loan’s total cost, your cash reserves, and what you would otherwise do with the money. Paying cash avoids loan interest but uses funds that could stay available for other needs. Financing preserves cash while adding payments and interest. Compare both choices using the same vehicle price and consider liquidity as well as the calculator’s estimate.
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Should I finance a car even if I can afford to pay cash?
Financing may make sense if keeping cash available matters to you and the loan terms compare favorably with your alternatives. But investment returns are uncertain, while loan costs are specified by the contract. Compare the APR and total payments with your cash needs and risk tolerance. This calculator uses your assumed after-tax return; it is not a forecast or recommendation.
Related: Cash vs. finance calculator
Does paying cash for a car save money?
Paying cash avoids the interest and loan charges that would apply to financing the same purchase, but the final difference depends on price, fees, incentives, and how much liquidity you give up. Some promotions may be tied to financing. Compare the written cash and finance prices instead of assuming either option is automatically cheaper.
Related: Car deal comparison calculator
Is it better to invest my money or pay cash for a car?
Compare the loan’s APR and charges with the after-tax return you reasonably expect, while recognizing that investment returns are not guaranteed and can fall. Also consider emergency savings, other debt, and how much risk you can accept. This calculator discounts loan payments using an annual return assumption you enter; that assumption is a scenario, not a prediction.
Related: Cash vs. finance calculator
Can I negotiate a better price by paying cash?
Paying cash does not guarantee a lower vehicle price. Dealers may have different pricing or incentives for cash and financed purchases, so negotiate the selling price separately and ask for the out-the-door total in writing. Compare any finance-only rebate with the interest and fees of the required loan before deciding how to pay.
What are the advantages and disadvantages of financing a car?
Financing lets you spread the purchase cost over time and keep more cash available, but it adds interest, required payments, and a loan balance until payoff. A longer term may lower the monthly payment while raising total interest. Review APR, total payments, fees, down payment, and loan length, then compare the offer with paying cash.