Should I finance a car or pay cash for it?

This auto calculator could help you find out what might be the best move for you.

Paying for a vehicle can be a large expense. Our auto loan calculator can help you determine whether it’s overall less expensive to pay for the vehicle with cash or purchase it using financing. Typically, the interest rate you receive on a savings account will be less than the loan rate. But that’s not always the case when manufacturers offer incentives. Once you enter the vehicle purchase price, interest rates for the vehicle loan and savings account, along with the number of months for the loan, the calculator will determine what the loan payments would be. It will also display if you’ll save more overall by paying cash.

If you have an emergency fund with 3 – 6 months of basic living expenses saved, try to refrain from taking money out of that fund for your new car.

Buying a car: Cash vs. financing

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Monthly payment: $0
Total interest: $0
Your monthly loan payment will be $0 and you will pay $0 interest over 0 months.
If you pay cash for your auto when purchased, and then continue to save, you will have $xxxxxx in savings accumulated.
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Helpful car loan and purchase definitions

Here are some terms that may help you be better prepared for the car buying process.

  • Down payment. This is an amount that you pay at the time of the car purchase. A down payment reduces the total amount financed, which can help lower your loan payments.
  • Car rebates. A car rebate is usually offered by the car manufacturer as an incentive to buy a specific new car model. They are usually paid to the customer as a lump sum or may be applied towards the down payment.
  • Trade-in value. This is the value of an existing car that you are planning to give to the dealership as credit towards the car you are buying. The trade-in value is determined by many factors including the year, make, model and condition of the car.
  • Sales tax. The amount of tax that you will pay for the car you are buying. The rate is set by your state and will be part of the total purchase price of the car.

After you have decided on the best option for buying a car, consider reaching out to a State Farm® agent to learn more about car insurance or any insurance discounts you may qualify for.

Neither State Farm® nor its agents provide tax or legal advice. This calculator is for illustrative and educational purposes only. Its accuracy and applicability to your circumstances is not guaranteed. Please consult your own adviser regarding your particular circumstances.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

State Farm Mutual Automobile Insurance Company
State Farm Indemnity Company
Bloomington, IL

State Farm County Mutual Insurance Company of Texas
Richardson, TX

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