Lesson 44 of 53 · Car loan or cash · 3 min read · Reviewed 29 Oct 2026
Compare the loan’s APR with what the cash would earn after tax. A loan at 9% costs more than an FD earning 7% before tax, so paying cash saves money if it leaves your emergency fund intact. A loan makes sense only when the cash would otherwise earn more than the loan costs, after tax.
A car loses value from day one, so the interest adds to a falling asset.
Compare the loan’s APR from its Key Facts Statement with the after-tax return on the cash you would use.
Keep six months of expenses aside either way; a car bought with the emergency fund leaves you exposed.
Key idea: A ₹10 lakh loan at 9% over 5 years costs about ₹2.46 lakh in interest.
Try the short quiz on this page to check what stuck.
Yes. Less borrowed means less interest.
Check the APR in the Key Facts Statement; fees or a higher price can hide the cost.
Shorter terms mean higher EMIs but less interest overall.
For learning only, not investment advice. Built in India by a team that tracks its own money on Reva.