It only ever makes sense to borrow if you either
a) Don't have the cash
or
b) Have it but can get a better return on it than you are paying on the loan.
So as pointed out above if you are paying interest on a car loan
(7% or 8% is typical) then you need to be earning at least that
much annually on the cash that you chose not to spend on the car.
I bet you a penny you're not earning that kind of return on your savings, so
it makes sense to spend it rather than borrow. The desire for the comfort of
having a big wad of savings while repaying a loan is a common one but most people don't consider how much the loan is actually costing.
Here's an example. You have 20,000 cash. You want a new car that costs
20,000.
Option 1. Keep your 20,000 cash and earn 3% interest on it with Rabobank
less dirt in 5 years time you'll 22268 in cash. You'll have been paying permanenttsb 402 euro a month for 5 years to pay off the loan you took out and you'll have a 5 year old car.
Option 2. Spend your 20,000 cash, and each month put the 402 you would have been paying in loan repayments into your bank. Even earning no interest it works out
at 24120 in cash in the bank in 5 years time. It's too late for me to work out what the
3% interest would to to that but it would slightly bump up your final balance.
You'll have the same 5 year old car but you'll have more cash in the bank.
Only ever borrow for a car if you have no choice and even then you still have the choice of a cheaper car which if you're borrowing is a good idea.
-Richard