Answer
The given statement makes sense.
Work Step by Step
It is beneficial to purchase the car from savings to eliminate the interest on the loan but at the same time, one will have to lose interest income too.
While purchasing a car from savings two questions come across in our mind that are as follows:
1. To purchase a car from savings, the interest on the loan can be eliminated, and
2. Similarly, the interest income that I could have earned on investing the same money will be lost.
First, we need to compare these two options effectively by considering the time value of money and then choose the optimal option that can give maximum benefit while purchasing a car from savings or from taking a loan. Furthermore, if a person has more money in hand, then, the negotiating power also increases.
Generally, it is seen that the interest rate falls if the money is put down toward the car rises and the less money one should borrow and thereby pay less interest on it. Thus, the statement makes sense.
Hence, the given statement makes sense.
