Second Pillar Pension for Buying a Car: Is It Worth It in 2026?

Quick answer

According to WHEELSTREET data, withdrawing your second pillar pension to buy a car is almost never worth it — you lose 15% to income tax, miss out on 6-8% annual compound returns, and the car itself depreciates 40-50% in 5 years. For a €10,000 withdrawal, you effectively pay €1,500 in tax and sacrifice €15,000-20,000 in retirement savings over 20 years.

Since 2024, it has been possible in Lithuania to withdraw accumulated second pillar pension funds for real estate or other needs. Many are wondering -- is it worth using these funds to buy a car? In this article, we examine the taxes, calculations, and alternatives.

What You Will Find in This Article

Illustration: What You Will Find in This Article

• How second pillar pension withdrawal works
• What taxes apply
• Calculator: how much you will receive "in hand"
• When it is worth it and when it is not
• Alternatives: leasing and credit

How Does Second Pillar Pension Withdrawal Work?

Second pillar pension funds are a supplementary pension accumulation system, with contributions deducted from your salary. Since 2024, the option to withdraw part of the accumulated funds earlier than retirement age has become available.

Key rules:

• You can withdraw up to 100% of accumulated funds
• A 15% personal income tax (PIT) applies
• The payout is transferred within 10--20 business days
• The remaining portion continues to accumulate for your pension

Taxes: How Much Will You Lose?

When withdrawing second pillar pension funds early, a 15% PIT is applied. This means you will not receive the full accumulated amount.

Important: If you wait until retirement age, the tax will be lower or may not apply at all (depending on the payout method).

When IS It Worth Using Your Pension for a Car?

Using second pillar pension funds for a car can make sense in these cases:

Suitable if:

• A car is essential for work (generates income)
• The alternative is an expensive loan with 10%+ interest
• You have stable income and can rebuild your savings
• The accumulated amount covers a large portion of the car price
• You need a car urgently (health reasons, family needs)

Not suitable if:

• You are buying a car out of "want", not necessity
• You can get leasing at 5--7% interest
• You have less than 15 years until retirement
• The accumulated amount is small (under EUR 3,000) -- it will not change the situation

When Is It NOT Worth Using Your Pension for a Car?

Pension funds are your future security. Before using them, consider:

Lost benefit:

• The 15% tax immediately reduces the amount
• You lose the compound interest effect (the funds stop growing)
• A smaller pension in the future
• If the fund earns 7% per year, EUR 10,000 would become ~EUR 39,000 in 20 years

Example:

If you have EUR 10,000 and you are 35 years old:

• Withdraw now: you receive EUR 8,500 (after taxes)
• Leave until retirement (30 years): you will have ~EUR 76,000 (with 7% returns)

The difference is enormous. Therefore, pension funds should only be used in truly justified cases.

Alternatives: Leasing vs Credit vs Pension

Illustration: Alternatives: Leasing vs Credit vs Pension

Before using pension funds, compare with other financing options:

Our recommendation: If possible, first consider leasing with a 10--20% down payment. If the down payment is the problem -- then pension funds can be a solution.

What Cars Can You Get for EUR 5,000 -- 10,000?

If you have decided to use pension funds, here is what you can buy for typical amounts:

For EUR 4,000 -- 6,000 (after taxes from ~EUR 5--7k pension):

• Toyota Yaris (2012--2016)
• VW Polo (2010--2015)
• Skoda Fabia (2010--2015)
• Mazda 2 (2010--2014)
• Ford Fiesta (2010--2015)

For EUR 7,000 -- 10,000 (after taxes from ~EUR 8--12k pension):

• Toyota Corolla (2014--2018)
• VW Golf VII (2013--2017)
• Mazda 3 (2014--2018)
• Skoda Octavia (2013--2017)
• Honda Civic (2012--2016)

Read more about reliable models in the article TOP 10 Most Reliable Cars Under EUR 10,000.

How to Withdraw Second Pillar Pension Funds?

The process is simple:

1. Log into your pension fund (SEB, Swedbank, Luminor, etc.)
2. Submit a withdrawal request
3. Specify the amount (partial or full)
4. Wait for confirmation (up to 10 business days)
5. Receive funds in your account (with 15% PIT already deducted)

Documents: Usually no additional documents are needed -- just a request via online banking.

Frequently Asked Questions

Can I withdraw only part of my pension funds?

Yes, you can withdraw any amount -- from the minimum to 100% of accumulated funds. The remaining portion continues to accumulate.

How long does it take to receive the money?

Usually 10--20 business days from submitting the request. Some funds may transfer faster.

Can I continue accumulating after withdrawal?

Yes, contributions from your salary will continue to be paid into the fund. Withdrawal does not prevent further accumulation.

Is it worth buying a car from pension funds if I have debts?

It is better to first pay off expensive debts (consumer credits with 15%+ interest). A car can wait, but interest cannot.

Conclusions

Our expert recommendation

Using second pillar pension funds for a car is a decision with long-term consequences. The 15% tax and lost accumulation effect mean you are actually "paying" much more than it appears.

We recommend this option only if:

• A car is truly necessary (for work, for family)
• Alternatives (leasing, credit) are unavailable or too expensive
• You have a plan to rebuild your pension savings in the future

If you simply want a "better" car -- it is better to save or choose leasing. Your 65-year-old self will thank you.

Need help choosing a car within your budget? Contact the WheelStreet team -- we will help find the best option.

You may also find useful:

• 💰 Car Financing Options 2025
• 🔍 WheelStreet Financing
• 🚗 Used Cars at WHEELSTREET
• 💡 Leasing Calculator
• 📚 Leasing -- Glossary
• 📚 Down Payment -- Glossary

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