Emergency fund cannot exceed the loan term in months.
15% instant drive-off loss is built in
Cash vs Loan
Cash Cost
Net Future Value
Loan Cost
Net Future Value
Cash Option
Principal ?-
Opp. cost ?-
Loan Option
Principal ?-
Interest ?-
Opp. cost ?-
Risk Mgmt. ?-
Title
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Description
Risk Management
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Carrying a car loan means you need a bigger safety net, enough to cover payments if your income stops, plus any shortfall if the car is sold early or totaled before you pay it off. That extra cash sits in savings earning less than it would in your investments. This is the estimated opportunity cost of keeping that larger buffer.
This cost is based on increasing your emergency fund by -: