Over the past few years, my wife and I have done a lot of things right when it comes to our finances. We’ve built an emergency fund, maxed out our Roth IRA, and, most recently, started investing in a “real” brokerage account (yes, it’s actually in the market now and not sitting in a money market account). That’s why, when a recent conversation brought up the idea of replacing our current vehicle, my initial instinct was that such a move would be months or years away, allowing us to save up and pay cash. After all, that would be the soundest financial move short of just not having a car, right?
While that may be true, the more I thought about it, the more I realized that we shouldn’t feel the need to be perfect with our finances. There are far worse things we could do than financing a used car that fits into our budget. Plus, we’ve had our current car for eight years, which is probably longer than most. Could we get a few more years out of it? Probably — but neither of us knows enough about cars to know when trouble is around the corner and our frequent road trips mean we need something that’s not gonna be temperamental on long voyages.
I should also note that, technically, we could swing buying a car in the price range we’re eyeing all in cash. Of course, this would mean dipping into our emergency fund, which is a no-no. Thus, if we want something sooner rather than later, we will need to finance at least part of it.
One thing we do have going for us with this imperfect plan is that we do have strong credit, meaning we should be able to secure a fairly low-interest rate on any loan we do pursue. Nevertheless, the avenue will likely add a few hundred dollars to our total purchase. I suppose I could argue that the extra value we’re leaving on our current car along with any savings we’ll have from not needing to make major repairs to it would cover this spread — but the point is that we shouldn’t feel a need to justify our choice.
Ultimately, whenever we do decide to upgrade our car, you can bet we’ll have put a lot of consideration and research into our pick. Furthermore, we’ll definitely be sure that any car payment, extra insurance expenses, etc. don’t impact our savings/investing goals and that our emergency fund is adjusted accordingly. For those reasons, why it may not be the “best” financial move, sometimes it’s ok to simply settle for “better.”