Pay cash for a Tesla, or keep your savings?

Pay $220,000 in cash for a Tesla Model Y, or put down $88,000 and borrow $132,000 over 7 years?

Using SSB returns as a benchmark, keeping that $132,000 in savings costs the equivalent of about $24 a month in this example.

This works because Tesla’s effective borrowing cost is only about 2.7% a year. Other car loans can be around 5% EIR. At that rate, keeping your cash costs much more.

A $220,000 Tesla

For a $220,000 Model Y, the maximum standard bank loan is $132,000 over 7 years. MAS sets a 60% loan limit and a 7-year maximum term for cars with an OMV above $20,000.

That leaves an $88,000 cash down payment. Using the Tesla rate from the previous post over the full 7 years:

• Monthly repayment: $1,723.
• Total loan interest: $12,751.
• Effective annual borrowing cost: 2.68%.

Assume the car costs the same either way, with no extra loan fees.

What can your savings earn?

The November Singapore Savings Bond offers a 2.27% average annual return over 7 years. The loan costs 2.68%, so the gap is about 0.41 percentage points a year.

SSB is a useful benchmark because the government backs the principal and interest, and allows monthly redemption. You can recover your principal without a market-price loss, though the money arrives the following month.

For this comparison, assume your savings earn a steady 2.27% a year, with all interest reinvested. Actual SSB coupons step up, and future reinvestment rates will vary.

Fully paid in cash or borrow $132,000?

If you borrow, you pay the $88,000 down payment and keep $132,000 in savings earning interest. You pay the bank $1,723 each month from your income.

If you pay the full $220,000 in cash, you have no loan payment. You can save that same $1,723 each month instead, earning interest as you go.

Both choices buy the same car and use the same monthly budget:

The last row shows the money in your savings after the car is fully paid for. Paying cash leaves you about $2,138 ahead. Borrowing lets you keep $132,000 earning interest from the start.

That difference is equivalent to about $24 a month, allowing for interest earned. That’s the cost of keeping your cash available after accounting for what your savings earn.

Would I take the loan?

I wouldn’t put everything into SSB. I’d have a mix of safe savings and investments with more risk. SSB gives me a conservative starting point: even against that return, Tesla’s borrowing cost looks reasonable.

Shares could earn more than the loan costs, but they could also lose money. The monthly repayments still need to fit your income.

You can check other issues and holding periods with our SSB rates and coupon calculator.

Personally, I’d take the Tesla loan. For roughly the cost of a Netflix subscription each month, I’d keep my cash available for emergencies and other needs. That flexibility matters to me.