Is it cheaper to pay cash for a car?

It's almost always cheaper to pay cash for a car rather than paying for it in time through a loan. However, a loan with low interest will let people invest their money in other things instead of using savings to buy a car. It also leaves money available for emergencies.

The interest on a loan can make a car much more expensive. For example, a 5-year, $25,000 car loan with 6 percent annual percentage rate, or APR, would have monthly payments of $483.32. After five years, the owner would make a total of $28,999.20 in payments, $3,999.20 more than the cost of the car. Paying cash also lets people avoid the hassle of getting approved for a loan and making monthly payments.