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Debt dilemma: What you need to know before raiding your RRSP for a car purchase

Avoiding a car loan by dipping into your RRSP can feel like the safe choice, but the tax hit and years of lost growth may cost more than interest ever would.

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Q: I’m 37, single, and I’ve got as much life as possible out of my old car. I have some savings plus about $50,000 in my RRSP, and I’m considering withdrawing nearly half of it to buy a vehicle rather than taking out a loan. I don’t like the idea of a monthly payment hanging over me, and I grew up believing debt should be avoided whenever possible. My employer offers RRSP matching, so I think I could rebuild the account, but I’m not sure which option is smarter. What do you suggest? ~Claire

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