I would assume that you have enough money to buy the desired car.

From a purely financial point of view, it would definitely be beneficial to pay the money upfront rather than going for a loan.

Let me illustrate with an example. Say, I want to buy a car which costs me about Rs.10 lakhs. I would get a loan for up to Rs.8 lakhs (80%). You will have to pay Rs.2 lakhs as down payment. The question is whether paying this Rs.8 lakhs upfront is better, or to go for a loan.

For the purposes of this example, I will assume that any un-used money will be invested, let’s say in some Mutual funds. Let me assume 12% return from these funds. (I personally have got much higher returns, but let’s just stick to 12%). Also, car loan is available from 9.25% to 10%. Let’s assume 9%, hoping you get the best interest rate. For calculation purposes, I will exclude processing fees and anything else that is levied for the loan. I will also assume a 3 year loan tenure.