Nevertheless, I can appreciate his argument for the other side of the coin. Car issues aside, the war of principles here seems to be, “Creating more debt is a lousy way of getting out of debt” vs. “Cash on hand is better than sinking cash into a material item, even if it costs a little more.” The way I look at it is that financial wellbeing is a holistic thing: it’s not just the numbers although they’re the main focus. It’s also your family situation, your work situation, your health and future goals.

One reason to pay in cash now is that you don’t have to face future difficulties in case of a job layoff or if your income drops significantly. Trent says he has a very low-risk stable job, which allows him to manage his finances accordingly. If so, then maybe the new Prius is the choice for him.

I can also state that buying a new car can be very much an emotional decision, especially after a history of struggling with major car repairs and discomfort of dealing with a beater car. I did the same thing myself, but after my head cleared up, although I appreciated not having to worry about repairs and general maintenance issues, if I had to do it again, I probably would have gotten a used model.

I agree with the Happy Rock – he tried to rationalize being able to afford the car with talk about the emergency fund and a truck that would eventually need to be replaced and so on. But the simple fact is, if he could not – or would not – walk in and pay by check, then he could not afford the car.

Someone who does not lead by example is being dishonest somewhere along the way. Either his previous advice is wrong or his current rationalization is. One way or the other, he should own up to it.

With that said, it seems that The Simple Dollar made his mistake long before he whipped out his spreadsheets to do his extensive calculations. He keeps saying that he has the cash to buy a new car, but he didn’t. He isn’t willing to spend his ‘emergency fund’, which means he doesn’t actually have the cash. I say he should have bought a used car with cash that he could afford to spend, instead he used his emergency of collateral for debt. His calculations were wrong cause he wasn’t being honest with his siutation.

Dealing with a few extra miles on a used car and not getting exactly what you want until you can actually afford it would have been the brave smart choice IMO. With that said the decision will probably not give him any grief, since he has spent the last few years getting pretty darn good control over his finances and income.

The final ironic part is that he espouses some extremely involved frugal tips like mass making meals, making your own detergent, and others. All the years off effort are washed away in one big moment of weakness to finance $20,000k at 4% to get 2% or less after taxes in interest.

I say this from experience too, since I have been at his exact same spot at least twice in last 4 years. Here is the story and here is a quote from the was it worth it follow-up.

“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.”