1. You're paying interest on a depreciating asset that doesn't earn any return. Worse, the minute you drive the car off the lot, it's worth 20% less than you pa

1. You're paying interest on a depreciating asset that doesn't earn any return. Worse, the minute you drive the car off the lot, it's worth 20% less than you paid for it. So you're underwater on the loan immediately. Even if you sold it for book value you would lose money on the deal. 2. If you are able to pay cash but choose to take a low-interest loan and put the cash into investments that have a better return, you can come out ahead. But most people either don't have cash upfront, or are not sufficiently disciplined to do this. 3. If you own a car outright you can get by with liability-only insurance. If you owe money on it, the lender will require collision and comprehensive insurance, which costs a bundle.