Asked by Anonymous

Would you rather pay full for a car or take a loan?

I was thinking is it better to take a loan as my money could be better invested and earn returns (which may cover the interest rate of car loan), rather than paying a car in full?

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  • Clarence Chua
    Clarence Chua, Financial Planning Specialist at Prudential Assurance Singapore
    Level 5. Genius
    Answered 2w ago

    Ultimately, a simple guide to decide that will be if the cash that you are going to use for investment, can it generate an income that is more than the monthly loan repayment? If it can’t, then it’s definitely better to pay in full.

    For example if you car cost 150k total, in order to achieve a higher income generation that the monthly repayment, you may have to put up 100k upfront and take a 50k loan. And put the “un-use” 50k to invest.

    Ultimately, you must decide if it is also worth your time to do that, cause you might not have made any profit doing this or the profits are marginal.

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