Save or Borrow Calculator (Save Up vs Finance)

How it works

Loan payment A = P × i ÷ (1 − (1 + i)⁻ⁿ) · saving: balance_k = balance_(k−1) × (1 + s) + A until balance ≥ P × (1 + inflation)^(k ÷ 12) · cost of saving = A × k − leftover · difference = A × n − cost of saving

Financing lets you have something now; saving first usually lets you pay less for it. The calculator takes the monthly payment the loan would require and asks: if you put that same amount into savings instead, how many months until you could pay cash — allowing for interest on your savings and for the price rising while you wait — and how much less would you pay in total? It ignores the value of having the item sooner, which can matter for essentials like a car you need for work.

Worked example

Financing 10,000 at 12% for 24 months costs 470.73 a month, 11,297.63 in total. Saving 470.73 a month at 4% instead, you could buy in 22 months, when the price has risen 3% a year to 10,556.86; counting the leftover that stays in your account, you have paid 10,186.21 — 1,111.42 less than borrowing.

Sources: Investor.gov (SEC) — Savings goal calculator · Wikipedia — Time value of money

Frequently asked questions