Think buying a car in cash is a flex? Why millions of boomers are quietly wasting thousands in savings

Aditi Ganguly and Vishesh Raisinghani

Tue, September 22, 2026 at 7:55 PM GMT+3 7 min read

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Skipping auto financing completely seems like a "financial flex" that many Americans are happy to indulge in. Roughly 1 in 5 baby boomers or older, in fact, pay cash for their car purchases, according to a CDK Global survey (1) — and that ratio rises to nearly 5 out of 10 Gen Z car buyers.

Simply put, car loans seem to be less fashionable among younger Americans.

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On paper, this might seem like a smart move. Auto loan rates for super-prime borrowers were roughly 4.55% and 6.30% for new and used cars, respectively, per Experian's Q1 2026 State of the Automotive Finance Market report (2). So, looking at those rates, skipping the loan agreement might feel like an instant, guaranteed return on investment.

But the move could be costing you thousands of dollars over the long run. Here's why.

Depreciation and opportunity costs

As of May 2026, a typical new car sold for roughly $49,220, according to Kelley Blue Book (3). Paying that in cash is a big up-front commitment. And unlike stocks or real estate, new cars rapidly shed value. In fact, a new car can be expected to lose roughly 30% of its value in the first two years alone, according to Kelley Blue Book (4). Beyond that point, it continues to depreciate at an annual pace of 8% to 12%.

In other words, you're on track to lose tens of thousands of dollars in just the first few years of ownership. This depreciation cannot be fully avoided — but financing a portion of the purchase at 4% to 6% can offset some of the exposure.

Meanwhile, the cash you save by financing can potentially earn a higher return in other assets. The S&P 500, for instance, has delivered a roughly 10% annualized return since 1957, according to Fidelity (5).

This is the potential opportunity cost of paying for a car in cash instead of borrowing at a reasonable interest rate.

The case for financing

Paying cash for a car can feel like the financially savvy move. After all, you avoid interest charges and skip another monthly payment. But for boomers with a healthy nest egg, putting $50,000 or more into a depreciating vehicle all at once can also mean giving up access to cash that could be doing more useful work elsewhere.

While stock market returns are never guaranteed, keeping some money invested or simply available in an emergency fund can provide a valuable cushion. Otherwise, an unexpected home repair, medical bill or other large expense could leave you reaching for a high-interest credit card — potentially turning a paid-off car into a much more expensive financial decision.

And if you've already financed your vehicle, there may still be a way to make the loan less painful. Refinancing could allow you to replace your existing loan with a lower rate or different repayment terms, potentially reducing your monthly payment or the amount of interest you pay over time.

Americans who refinance their auto loan save an average of $1,346 over the loan's lifetime. Those who refinance into a shorter loan term can save even more — an average of $6,291 over the loan period (6). That money could instead help fund a future repair, replenish your emergency savings or simply give your monthly budget a little more breathing room.

LendingTree lets you shop around and compare rates offered on auto loans by reputable lenders near you.

You can find rates as low as 5% APR in just three simple steps. Once you fill out their form with some basic information about yourself and the vehicle you'd like to refinance, LendingTree will match you with up to five lenders that best fit your financial profile. From there, you can choose which offer you'd like to proceed with.

The best part? This process is completely free and it only takes a few minutes.

Put your home to use

If you've built substantial equity in your home, your car doesn't have to be the only asset you consider when a large expense comes along.

Rather than purchasing a vehicle in cash, you could explore whether a home equity line of credit, or HELOC, makes sense for your situation. A HELOC allows you to borrow against the equity you've built in your home as needed, so you generally pay interest only on the amount you actually use.

Because the line of credit is secured by your home, the interest rate can be lower than what you might find with an unsecured personal loan or credit card.

You can tap into your home equity with a HELOC from AmeriSave and access your full funds right at closing.

You can choose a draw period that fits your life — three, five, or 10 years — along with 20- or 30-year terms to suit your budget. And with a 10-year interest-only option, you can keep monthly payments manageable while you plan ahead.

It's essentially a flexible credit line secured by your home, delivered through a mostly online application process. Just make sure you understand the repayment terms before committing.

Keep other carrying costs low

Ultimately, the goal may be to look beyond the sticker price and think about the cost of keeping the car — and how much of your money you want tied up in it. Even though you could probably afford a $50,000 car in cash, financing just half of that leaves you with $25,000 that can be put to work elsewhere.

And the loan isn't the only carrying cost worth watching. Car insurance has also become significantly more expensive, with premiums jumping 29.3% between 2020 and 2025 (7). Comparing insurance quotes could help offset some of those rising costs and make it easier to keep your overall vehicle budget under control.

Comparing rates through services like Insurify can help you uncover cheaper options.

Here's how it works: Just answer a few basic questions and Insurify will show you the most affordable deals in as little as three minutes. Those who shop around and compare car insurance rates from different providers on Insurify and choose the best available deal save $1,100 on annual premiums on average.

Not only is the process 100% free, but you could also save up to 15% by bundling your car and home insurance.

Think about getting some help

Finally, if measuring opportunity costs, interest rates, and investment returns is too much work, you can hire an expert financial advisor through Advisor.com, a platform that connects you with an expert near you for free.

Advisor.com does the heavy lifting for you, vetting advisors based on track record, client ratios and regulatory background. Plus, their network comprises fiduciaries, who are legally required to act in your best interests.

Just enter a few details about your finances and goals, and Advisor.com's AI-powered matching tool will connect you with a qualified expert best-suited for your needs based on your unique financial goals and preferences.

Finding the right advisor isn't always easy — there's no one-size-fits-all solution. That's why Advisor.com lets you set up a free initial consultation, with no obligation to hire, to see if they're the right fit for you.

Once you've got the right financial advisor in your corner, you can optimize every purchase, from new cars to new homes, to save money.

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Article Sources

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CDK Global (); Experian (); Kelley Blue Book (), (); Fidelity Investments (); LendingTree (); U.S. News & World Report ()

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.