IMHO, this is too simple a generalization. Any simple generalization will almost always have enough exceptions to the contrary.

A) Keeping cash can be simply viewed as holding on to the privilege of being able to survey options. (Maximizing liquidity, for short)
B) Any use of cash is a commitment to an option.

But what is the goal of keeping cash then? To Maximize Liquidity simply as an end to itself? Of course not, unless you are a daft money manager. I'm assuming then your generalization of "Cash is king" then is that it's best for Maximizing Net worth.

But is keeping cash always really the best for maximizing net worth? The answer is that it's entirely SITUATIONAL. And paying cash for a car (assessed against all other present and future options) is not necessarily a bad choice to make. Though I will leave out the details of when and why.

FYI, there is this thing called the cost of holding cash.

To the person that revived this old topic.
Someone earlier mentioned "Straight Line" interest and "Rule of 78".
1) Straight line method aka Flat Interest aka simple Interest is an interest payable calculation method <=== This is the what makes a personal loan or car loan more expensive than it seems. Beware.
2) Rule of 78 aka Sum of Digits method is a settlement calculation method <=== This is why it may make sense to settle your house loan early, but not necessarily your car loan or personal loan

This post has been edited by METALRAGE: Jul 21 2015, 11:09 PM

The mechanics you explained are wrong.

But of course, reading from all your posturing on this forum in the past, you know everything already and have nothing more to learn.

My friend. You are forgetting the time value of money. You pay rmX every month. Not RM112500 at the end.

Put it another way, rmX every month in FD at 4%p.a. for 5 yrs does not yield rm112.5k

Suggested reading: http://loanstreet.com.my/learning-centre/i...e-flat-interest

This post has been edited by METALRAGE: Jul 27 2015, 12:19 AM

No offense to you my friend. I only hope to impart the correct knowledge so you can see the gaps in your understanding.

The illustration below is a total apple to apple comparison:

Scenario 1 - Take car loan, put RM100,000 in FD
FD Placement - RM100,000 @ 4%p.a.
Car Loan instalment - RM1,875 per month (paid from other source of funds)
Total outlay - RM100,000 + RM1,875 every month throughout tenure = RM212,500 (absolute value, not adjusted for time value of money)
Total return - One car + Rm120,000

Scenario 2 - RM100,000 used to pay for car in cash
Car Purchase - RM100,000 single bullet payment
FD Placement Instalment - RM1,875 every month @ 4%p.a. (paid from other source of funds)
Total outlay = RM100,000 + RM1,875 every month throughout tenure = RM212,500
Total return = One car + RM...

Want to take a guess what the total return is in Ringgit?