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Message: <blockquote data-quote="EL118" data-source="post: 542120" data-attributes="member: 22940">this question is relative. it is very much depends on how well u can generate return on your available capital / cash. scenarios as followsi) if Mr A's best investment is in FD which yields 3% per annum. and effective car loan is at 5% (flat at 2.5%), it is better to buy using cash. (ceteris paribus - assuming all other things being equal)ii) if Mr A can consistently or on average generate return of 10% compound return from his share investment or property investment, it is better to channel his cash to investment instead of buy car using his cash. (again ceteris paribus)The above are simple comparison examples but it shows the basic importance of capital allocation (which makes Warren Buffet one of the richest man in the world)</blockquote>