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Car loan vs paying cash calculator

Paying cash avoids interest; borrowing keeps your money invested. Which leaves you richer depends on one number — the return you’d really earn. Here it is.

Car price (on-road)

₹

₹12 lakh

Down payment

₹

20% of the price, paid upfront either way

Car-loan rate

%

Loan tenure

yrs

Return if you invest the cash instead

%

FD ~7% · balanced fund ~9–10% · equity ~12% (not guaranteed)

Depreciation

Car loses value each year

%

Typically 15–20% in year one, then ~10%

Taking the loan leaves you richer by

₹20.4K

after 5 years · EMI ₹19,928/month · interest ₹2.36 L

Same money, two paths

Pay cash

₹15.26 L

Then invest ₹19,928 a month — the EMI you’re not paying

Take the loanAhead

₹15.46 L

Keep ₹9.6 L invested at 10%, pay the EMI from income

Break-even: the loan only wins if your investments earn more than 9.4% a year after tax.

EMI

₹19,928

Interest paid

₹2.36 L

Car worth after 5 yrs

₹5.32 L

What the car is worth

Only true if the invested money actually earns that return and you don’t dip into it. For most people, a short loan with a big down payment is the practical middle path.

How it’s calculated

The maths, in plain words

Pay cash

You pay the full price now, then invest the EMI you’re not paying, every month, for the loan term.

Take the loan

You pay the down payment, keep the rest invested, and pay the EMI from your income.

Break-even

The return at which both paths end equal. If your investments can’t beat it after tax, pay cash.

Questions

People also ask

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Is it better to buy a car with cash or a loan?

If the car-loan rate is 9% and your money earns 7% in an FD, cash wins. A loan only wins if your investments reliably beat the loan rate after tax — and you don’t dip into them.

How fast does a car lose value?

Steeply at first, then more slowly. Insurers value a 5-year-old car at about half its price, and resale is often lower. This calculator assumes 15% a year, which takes a ₹12 lakh car to about ₹5.3 lakh after 5 years.

Understand it

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