Previously I shared how we paid off our $15,000 car loan and were able to pay cash for two more cars in the following years.
As I thought back through our story, I was left asking myself “Was it worth it?”.
We got a lemon of a car in the Ford Focus, so yes it was extra hassle dealing with that. The fact of the matter is that bad breaks happen sometimes, even if my research said the Focus should have been pretty reliable. I don’t think making choices based on a fear of low percentage what-ifs isn’t going to breed success.
The decision was close to being a wash in the strictest financial sense. If we purchased the Murano right out of the gate, we would have paid about $17,000 for a similar Murano. That would have left us with financing of $8,000 @ roughly 7%. Since we paid about $8,500 in cash after the Focus trade in, we would have had the loan paid off in a year. That would have wasted about $300 in interest, and about $150 in opportunity cost in savings interest.
The only other thing to factor in is that we would own a car with an extra 15,000 miles on it. Using a Kelley Blue Book estimate that is about $1,000 dollars or so in unrealized savings.
Most of the numbers were irrelevant though. We had spent 4 years digging out of debt, so going back into debt would have proved that we hadn’t learned any lessons. On the other hand, sacrificing the car we wanted for a year and paying cash continued to set the stage for us to win financially. Going into debt would have opened up the financing option again on all other subsequent purchases. This was a test, and we passed. We had the benefits of being debt free firmly implanted in our minds, and we were not about to give them up.
The intangible benefits we received from paying cash seem extremely worth it, what do you think?