It's all about the money...

There seems to be a lot of disadvantages for car buyers to pick up a car loan, so for the cash-rich buyers, there's always the easy way out by paying off the purchase in full cash to avoid the costs of financing. Right?

Not exactly.

It is not a straightforward decision though, as it really depends on a number of factors to determine if paying the car in full cash is of advantage, or not, to the buyer.

Firstly, it depends on how much cash in hand the buyer has, as one should have some spare cash in hand for rainy days after paying off the car in full. Secondly, it depends on other life plans the buyer has - like getting married, buying a house, starting a family or other investments plans - and the extra cash in hand may come in handy to execute all these plans. Thirdly, it depends on the loan interest rates versus the interest given on a savings plan. Fourthly, the overall macro and micro economic conditions will affect one's decision on this, and especially true for those in business as the additional cash in hand may come in handy. Lastly, it depends on the sales package of the car offered by the dealers in purchase with a loan, as opposed to purchase without a loan.

It doesn't take a rocket scientist to decide if one should take up a loan on the car, or how much loan to secure - but it is also not as straightforward as taking the PIE from Changi Airport to Tuas.

It's very easy to overlook some important factors during the purchase, especially when one is overruled emotionally. Thus, always remember that it is important for one to step back and look at the whole situation objectively and rationally...

Credits: Story by Steven Lim, pictures courtesy of Oneshift.com archive