Many consumers prefer to finance their car purchase, rather than paying cash.
But don't be misled by an auto dealer's fancy computer-generated cost comparisons or other claims that you will save money by financing. Remember that when you pay cash, you have no monthly payments to make. Even if you were to invest each month's car payment in a Certificate of Deposit or other interest paying investment, you would not come out ahead, unless the interest rate of the investment exceeded the loan interest rate. An advantage of financing is that you will retain your cash and improve your cash flow, thereby enabling you to use your money for emergencies, college tuition or other purposes. Under some circumstances, if you finance a car that develops serious problems, you may have recourse against the finance company as well as against the dealer or manufacturer.