Paying cash for a NEW car is just as much 'hole digging' as taking a loan on one.
Not really. The hole if you pay cash is simply the value of the car minus the value you paid. A NEW car will lose like 20% of its value, allegedly, so the hole is 20% of the total price.
$30,000 car * 20% = ~$6,000 hole.
If you finance that $30,000 car because you have no savings, then all sorts of bad things happen. You lose cash flow(something like $300 to $500 a month, depending on interest rate, down payment, loan length, etc...), you probably pay interest, etc.
If you pay cash for a car and lose your job, you could immediately sell it and buy something cheaper(or buy nothing and go carless). If you finance and lose your job, you might be unable to pay the gap and are thus stuck with the car or the car gets repossessed and you get a credit ding.
It is not even close to the same.
Unfortunately you missed the point. I'm unsure why folks don't accept the context of this forum. I am not talking about broke idiots buying cars they can't afford. This is the MMM forum!! Its moving assets and liabilities around.
If you have $1M in assets and you buy a NEW $30k car with cash or you take a loan for that $30k, there is zero difference. You either end up w/ $970k left earning money plus a vehicle (with a 15% loss off the lot) worth $25K. Thats a new NW of $995K.
Or you can take a loan at a low loan rate that most mustachians (ie not broke idiots) will get. That means liability of $30k at X% (usually 2% nowadays even on used cars) plus untouched $1M earning money. What's the NW total? Yup, $995k. EXACTLY the same.
The ONLY difference is that $30k now sits in liability at X% while an additional $30k sits in investments at some other rate (hopefully higher than X!).
Its called opportunity cost. You are wasting money (ensuring a loss) buying the NEW car either way, that's a constant. Where will you bet the $30k will do better? Thats the only question.
Similar applies to Investment properties. You take a loan (liability) for several $100k presuming that you will have a positive return on that loan. You shift a cashed out asset to real estate that (hopefully) produces a better income stream. Does that put one 'in the hole' several $100k? Heck no! The poll is useless. If all my money is in cash, stocks, or rental properties, the only difference is asset type.
As an example I have a used car loan for $7000 at 2%. And yes I could have sold after tax mutual funds instead and just purchased the car out right. I am simply wagering my funds will net me a better return over the next 3 years than 2% (+ancillary costs...insurance...etc). They may not.
Regardless, my NW at time of purchase dropped by transactional costs (title, tax, etc.). That is the actual 'hole'. I am not suddenly in a $7000 hole just because I have a liability added to the balance sheet.