Should You Finance the Car or Pay Cash

On a $35,000 car at 6.4% (the 2026 new-car average, Experian State of the Automotive Finance Market, Q1 2026) over 5 years, the loan costs about $6,000 in interest. If you instead paid cash but had invested that $35,000 at 7%, it would grow to about $49,100, a gain of roughly $14,100 before tax. After a 22% tax on the gain, you net about $11,000, which beats the interest by about $5,000 — so financing and investing wins here for a new car at today’s new-car rate. The result flips if your loan rate is high or your investment return is low or taxed heavily. Used-car loans average about 11.4% (Experian Q1 2026), which usually flips the math toward paying cash. It also assumes you actually invest the cash rather than spend it, which is the real behavioral risk.