Cash vs Installments Calculator
Is it smarter to pay cash upfront or finance and keep your money invested? This calculator compares the true cost of both options.
If a $10,000 purchase can be financed at 5% APR while you invest the cash at 8% annually, financing is smarter — the investment gains more than the interest costs. If the rate is reversed, pay cash. This calculator finds the break-even and winner for any scenario.
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Cash vs Installments Calculator
Purchase price · Finance rate · Investment return · Term
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Your scenario
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months
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True cost comparison
Pay cash
Cash paid upfront
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Investment gains foregone
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True cost of paying cash
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Finance (installments)
Monthly payment
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Total interest paid
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Cash invested & grown
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True cost of financing
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How it's calculated
Opportunity cost: the key to the cash vs finance decision
Pay cash true cost = Price × (1 − discount%) + opportunity cost
Opportunity cost = Price × [(1+invest_rate)^(years) − 1]
Finance true cost = Total interest − investment gain
Investment gain = Price × [(1+invest_rate)^(years) − 1]
(money you keep invested while making payments)
Finance wins if: invest_rate > loan APR (net of taxes)
Cash wins if: loan APR > invest_rate OR cash discount is large
- 1Cash price (after discount)—
- 2Monthly installment—
- 3Total paid in installments—
- 4Installment interest cost—
- Opportunity cost
- The return you forgo by using cash for a purchase instead of investing it. At 7%/yr, $10,000 grows to $11,449 in 2 years — that's the opportunity cost of paying cash.
- APR (Annual Percentage Rate)
- The true annual cost of financing including all interest. Compare directly to your investment return rate.
Disclaimer: this analysis ignores taxes (investment gains may be taxable; mortgage interest may be deductible), psychological factors (debt aversion), and liquidity needs. Use as a starting point, not a final decision.
Frequently asked questions
Should I pay cash or finance?
If the financing rate is lower than your expected investment return, financing wins mathematically. If the rate is higher, pay cash. A 0% promotional financing offer is almost always better than paying cash (as long as you actually invest the cash).
What if there's a cash discount?
A 5% cash discount on a $10,000 purchase saves $500 instantly — equivalent to a 10% APR 2-year loan. Enter the discount percentage and the calculator adjusts the cash option accordingly.
What about 0% financing?
0% financing is almost always better than paying cash — you pay no interest while your cash earns a return. Exception: if a significant cash discount is only available for cash buyers. Always compare total out-of-pocket cost.