Car Financing vs. Paying Cash: Which is Better? | myFICO

The tool helps you determine whether it is cheaper to borrow money to buy a vehicle or to pay cash.

Generally, if the interest rate you earn on your savings is lower than the after-tax cost of borrowing, it is cheaper to pay cash.

However, you face a potential loss of financial flexibility if you pay cash. For example, you may have to deplete your rainy-day funds. The risk of not having an adequate emergency fund may be one you are not willing to accept in exchange for paying cash.