Should You Use a 401(k) Loan to Buy a Car?

A 401(k) loan may avoid a bank loan and repay interest to your own account, but the borrowed balance is out of the market while the loan is outstanding. The real cost is the opportunity cost of missed compounding plus any plan fees or repayment risks.

The biggest practical risk is job change. Some plans require faster repayment after leaving an employer, and unpaid balances may become taxable distributions.

Use the calculator to compare a 401(k) loan with dealer financing and taxable investment liquidation.