: Pay down the student loan, or buy the car with cash? I have a student loan with about 43k remaining. I want to buy a vehicle that costs about 10k. I have excellent credit. The interest rate on my student loan is over 6%;

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To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest.

To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term.

I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.

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Here's another way to look at this that might make the decision easier:

If you apply your cash to your student loan, that's like investing the cash with a guaranteed 6% return. The downside is that the cash becomes inaccessible.
If you then go out and apply for a car loan at a lower rate (let's use 3.5% as an example) then you are effectively collecting the spread between the two loans, which is 6% - 3.5% = 2.5%.

Looking at it this way you can turn this into a financial arbitrage opportunity, returning 2.5% compared to paying cash for the vehicle and carrying the student loan.

Of course you need to take other factors into account as well, such as your need for liquidity and credit. I hope this helps!