Auto Loan vs Cash: Which Is Actually Cheaper?

Paying cash avoids visible loan interest, but it can create less visible costs if the cash comes from investments. Selling taxable holdings may trigger capital gains tax and remove money that could have continued compounding.

The useful comparison is loan interest versus tax cost and missed investment growth. A traditional auto loan can be cheaper when the preserved investment balance grows faster than the loan costs. Cash can win when loan rates are high, investment returns are modest, or the cash does not come from productive assets.

Use the calculator to compare both paths with your own loan rate, tax assumptions, investment basis, and expected market return.