If you have a good nest egg and taking the withdraw won't hurt long
term goals, in my eyes right now it's lower risk to just use money you
have versus incur debt at crazy high rates.
You are pulling out of your IRA money that you set aside in a previous years for your future retirement. When you pull those funds out of the IRA you can't put those funds back in. That opportunity is lost forever.
Just because you get a loan for x months you can pay it off quicker by aggressively making extra payments. Avoid a auto loan with a prepayment penalty. These types of penalties are very rare. Paying it off quickly saves you interest.
Also remember in addition to the 10% penalty, you will also pay income taxes on the money you withdraw. That has to be factored in when you determine the additional funds you will have to find with to turn the IRA funds into a car. You may have to take an even larger withdraw to afford the car.
- price of car: $30,000
- tax rate: 22%
- penalty: 10%
- total rate: 32%
- amount required to have a net of the car price: $30,000/(1-0.32)=$44,118
The $30,000 loan over 5 years at 9% is $622.75 per month, and the total interest you will pay over the 60 months is $7.365.04.