Looks like I'm late to the party. Nevermind, I'll add it in anyway.

If you're comparing hire purchase interest against term loans/OD, bank deposit returns, investment returns, etc; KIV the different way HP interest is calculated.

For instance, if you take a RM10,000 loan from a bank, at 3% pa, for 5 years, the installment would be about RM177 per month, and after 5 years, you would have paid RM10,795.

If you take a RM10,000 HP, at 3%, for 5 years, the interest would be RM1500, and you would pay back a total of RM11,500.

TS already have 120k to buy the car cash. The question was whether he should use it all to buy a car cash, and have no spare funds. Or take HP.

The refinance house thing is a proposed third option. Buy the car cash. Then refinance house, and put the money back in the bank. This way you get "spare cash". IINM, interest would be much much lower than HP. Plus you're not actually using the cash, so costs would be even lower compared to HP. And you still have the flexibility of having 120k to chase up any business opportunity that comes up.