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If you have the $40k in hand and can also qualify for 0% interest, what's the harm in making payments while keeping your money is in the bank and knowing that you could pay the car off at any time if you wanted to? It allows you to keep the money accessible in the event of an unforeseen emergency, while also retaining the option to use those assets to pay off the car at any time if you so desire. I enjoy the security of having the money in the bank. You never know when an emergency could crop up. Spending $40k outright isn't an option for most folks.
I understand the logic of not taking on debt when you could avoid it, but I feel like having the liquid assets would be more desirable than not having the cash available and instead owning an expensive item with a depreciating value that you can't use to pay for something if a crisis arises.
I agree, owing money on a depreciating item isn't great either. From where I'm sitting, though, I'd rather have an interest free car payment and $40k in the bank than no payment and $40k less cash available to me. I'd rather have the large lump sum of money available for a rainy day than be free of a $500ish a month expense for the next 5 years. I can easily afford a monthly $500 payment, but not an unexpected $20,000 payment that pops up out of nowhere if my house gets flooded or something (maybe not the best example because I have insurance, but you get my drift.)
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