For years, most personal-finance experts have said, "Of course it does!" It seems like a no-brainer: Car loans add interest payments and fees to the principal, and those can add up to big bucks over the life of the loan. But in today's environment, when interest rates are low and cheap financing deals are common, the answer is a little less clear. Does it still make sense to buy a car the old-fashioned way? The Argument for Paying Cash: It Has Become Very Tempting to Overspend Personal-finance experts have long argued that paying cash is the best way to go when buying a new car or truck. By paying cash instead of taking out a loan, you'll avoid interest charges and financing fees, which can add thousands of dollars to a car's purchase price. View all Courses That's true even at today's low interest rates. On a loan of $30,000 with a 60-month term at 4 percent interest, the interest payments add up to $3,149.68 over the life of the loan. If there are fees associated with the loan, you might pay even more. That extra $3,000-plus is a big part of why many advisers suggest paying cash for a car if you can. And there's another reason to consider the save-up-and-pay-cash approach: Simply put, it's a lot harder to overspend.
