PFA: The better course to take is the one that makes you better off ultimately. Borrowing is not bad in itself. It is bad if it makes you worse off.

It seems you have planned your business quite deliberately and understand the value of diversification. It would be good to see your overall portfolio to see to what extent it can meet your goals adequately. It seems also that you have a pretty good idea of the better course to take but you just want reassurance. You are not singular in this regard.

You clearly recognise that it is good to have cash. 'Cash is king,' is a correct maxim for it puts you in a position to take advantage of investment and other opportunities that arise. In your case, will holding on to it make you better off?

charges

Let us see what would happen if you bought the car for cash. The obvious is that you would see the restructuring of your portfolio of assets. Cash would be replaced by the car. You would also forego the income you now earn on the cash. The good thing is that you would have no debt to service.

But what if you invested one half of your cash to earn income and used the rest to pay towards the purchase of the car, thereby making it necessary to borrow the rest of the funds required to purchase it? You would have a car, one million dollars earning income, and a million-dollar debt, on which you would have incurred various charges before the funds were made available to you, and debt servicing inclusive of principal and interest.

You have said it well by questioning the wisdom of taking that course when the cost of servicing the debt would exceed the income you would earn on the funds you would invest.

Consider, too, the effect of taxation on your investment income. Beyond that, would you prefer your car or another asset to be 'free' or to be pledged to a financial institution unless it is absolutely necessary?

Considering that you would have a shortfall, would you eventually encroach on the sum you would have invested, or would you divert funds from other sources? Furthermore, would the value of your car appreciate? I remember when that used to happen in Jamaica, but those golden days are now history.

Will future changes in interest-rate levels make a difference? Whether they increase or decrease does not matter seriously, for lending rates will tend to be higher than the return on income-earning investments.

million-dollar debt

Is there any way to restore the position of the 'king' - cash? Yes. Save systematically a sum equivalent to what you would be required to pay to service the million-dollar debt.

If replacing your car means what I understand it to, the option of selling it gives you another way to begin to restore your cash position, assuming you do not plan to add the proceeds to the funds you have identified to purchase your new car.

In the final analysis, borrowing a portion of the funds to purchase the car would only be prudent if the return on the portion to be invested exceeds the cost of servicing the debt.

That comes with its own challenges, for any investment that will do that for you is almost certainly one that would put your capital at risk.

Let me reassure you that the course of buying the car for cash is the one that will make you better off.