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

Quick answer

In WHEELSTREET experts' assessment, withdrawing your second pillar pension to buy a car is almost never worth it — you lose 15% to income tax, give up years of compound investment returns, and the car itself loses much of its value within 5 years. The tax hit plus the lost retirement growth far outweigh the short-term benefit.

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

WHEELSTREET ☎ +370 610 33377 | wheelstreet.lt