Car loan interest is flat rate, where as FD is compound interest. FD Wins.

I would choose put in FD not only for interest but also it's liquidity, I can use it in case emergency or invest into better return tools like stocks or businesses when the time is right.

Car loan uses something called Flat Interest Rate, you can convert it to Effective Interest Rate(something similar to FD) using some online calculator . https://loanstreet.com.my/calculator/flat-t...rest-calculator

3% flat rate for 7 years is about 5.57% effective interest rate.

In summary,
Scenario 1
if you take RM50,000 car loan for 7 years and dont touch the FD, you will have RM 65,796.59 in FD after 7 years compounding.

Scenario 2
if you pay with FD money and put the monthly installment you have to pay every month into FD, you will have RM 62,989.57 in FD after 7 years.

How you get RM62989.57 in scenario 2?? I got RM69895.20 through https://financialmentor.com/calculator/comp...rest-calculator

You already calculated the loan as 5.57 effective interest rate, which means the loan cost more than the earnings through FD..

Therefore of course it is better to pay the car using cash

The point is effective interest rate will go lower every year and not just 5.57% as you mention earlier.

I used 3% on both FD interest and car loan interest to prevent people asking "what if FD rate doesn't give 4% anymore".

Whether is 10k or 50k as principal, the compounding interest shows a positive net return over the 7 years loan.

*To break even the finance cost for a 7 year loan, one will need at least 6.5 years of time in FD placement.

Which is wrong?

To understand easier,
imagine

3% FD vs 3% P2P investment

P2P has a higher EIR, therefore bigger amount, compared to FD

Conclusion

If FD and Car Loan rate same

Use loan for the car and keep the cash inside the FD

Often if buy new car, the Loan Interest Rate is lower than FD rate. Hence, read back the sentence above.

Do you maths and prove me wrong

+1
post# 24 has the maths for those that needs it....

else google has many too

This is actually the accurate answer. EFFECTIVE RATE is the one we should look at. Not the flat rate.

If DP can gives more than personal loan/car loan...then bank rugi liao. Bank will never ever do rugi business. If things are too good to be true, usually it's not true

RM100k Loan, 3% P.A, 5 Years

Interest RM3k P.A, over 5 Years is RM15k

Effective Interest Rate is 15%

---------------------------------

RM100k cash put in FD, 4% P.A, 5 Years

Y1 Interest RM4,000 - Assuming you do not touch it since assume you buy car and cannot touch it. Compound Interest
Y2 Interest RM4,160
Y3 Interest RM4,326.40
Y4 Interest RM4,499.46
Y5 Interest RM4,679.43

Total Interest RM21,665.29

Effective Interest Rate 21.67%

---------------------------------

Nowadays FD is easily 4% and above with 1 Year Tenure and could be more if you have RM100k.
So? Post #24 only shows EFFECTIVE INTEREST RATE for the Flat Interest Rate (P.A). Question is why buy cash when you can loan?

Dude you totally miss out the monthly payment part... How can you compare like this????

Now let's assume your example of 100k 5 year loan. Loan:3%, FD:4%
Scenario 1 (Buying car with loan and putting 100k into FD)
Cost (Money you fork out): 100k in FD + 115k in repaying loan (1916 monthly installment)
So total cost is 215k
At the end of 5 years you will have a car (fully paid) and RM121,665.29 (FD) in bank
Scenario 2 (Buying car with cash, and use the monthly installment for FD)
Cost: 100k in car + 115k in FD (Putting the monthly installment in FD instead)
So total cost is 215k (see this is same as Scenario 1, and must be the same for a apple to apple comparison)

The calculation of a monthly saving 1916 to FD 4% can be found here https://financialmentor.com/calculator/comp...rest-calculator
The amount is 127,452

At the end of 5 years you will have a car (fully paid) and RM127,452 (FD) in bank

Yes, you "could" be right if they intend to use the Initial Capital in FD to pay off the Monthly Installment because the interest will be reduced.

My angle of view is, the money should not be spent in FD and used to earn interest while using own monthly salary to pay for the loan installment. Refer to following quoted post which illustrate a better comparison.
You are right especially on the Secnario 2, if without commitments, how disciplined are the people able to save the monthly installment amount as savings which eventually will yield more?

Same like, people that smoke and doesn't smoke. We don't see people that smoke saves more money?
I believe the point you are highlighting refers to the monthly repayment. I had made my explanation for the way I am going to manage it if it were me.

Because they don’t like paying interest to the banks.

If one is so piss off by bank earning your money, then don’t put money in the banks. They are using your money to loan to us to generate more income.

Be like Najib, keep in the house.