City lost 4-2 on penalties to SuperSport United in the final after 120 minutes of football produced a 1-1 stalemate at Moses Mabhida Stadium.
The Citizens opened the scoring through Sibusiso Masina before the break, but substitute Thabo Mnyamane equalised late in the game. After no goals in extra-time the match went to penalties, with SuperSport goalkeeper Ronwen Williams saving two attempts from Lyle Lakay and Judas Moseamedi as the Tshwane giants slotted all of their penalties.
McCarthy was naturally disappointed to miss out on a medal in only his 10th game as a head coach, but is mindful he can not afford to dwell on the setback.
"Most definitely it is stepping stone," said McCarthy.
"I think the best way of learning and growing as coaches is when you do taste defeat as much as you don't like to admit it. When you are nine games in your coaching career, you sitting third on the log and in your first final, then it'll always be nice to have a winner's medal to your name. You also learn by winning because you want to continue doing that. But when you lose I think it's how well you pick yourself up and how well you can get your players to switch on now and just push forward. That's going to be a challenge."
McCarthy felt his men exceeded expectations just by getting to the final.
"It's not going to be easy because my players took it really hard. They felt that this game was there for them to lose, so we'll learn from this. We weren't expecting to be in the final anyway. The bookies had us nowhere near even going pass Polokwane City for that matter [in the quarter-finals]. The boys should be proud of themselves for proving the point that they have the ability to compete at the highest level, and now we just have to keep moving forward."
City next host Bloemfontein Celtic in the league at Athlone Stadium tomorrow minus suspended midfielder Mpho Matsi.