I recently found MMM's blog and have been hooked ever since. Being just a year out of college and combined 100k in debt, my girlfriend and I have realized that frugality and wise utilization of our savings will be absolutely necessary in getting out of debt and ultimately achieving financial independence.
Mr. Money Mustache has repeatedly drilled into my head NEVER to buy a car on finance. And while I know I should be cycling to work, my girlfriend and I will soon be moving to Los Angeles (where she's from) and renting somewhere in the city. I do not have a job there yet but upon getting one I will be buying a car. I am at least trying to keep it Mustachian by looking in the $5-8k range for used Hondas/Toyotas with around 100k miles that will hopefully last me the next 3-5 years until I'm out of debt. I am saving up cash for the move and will have at least $8k in savings by the time I purchase, so my thinking was to listen to MMM and buy the car cash so as not to accumulate another dreaded loan. However, after thinking about this I am not so sure it is the best option. I have about 10 different student loans (for about $70k total) and most of them are at respectable interest rates, 3-4%. I have a couple Federal ones at 6%, and one painful loan at 8%. My plan for the loans is to use all and any extra money to first get rid of the 8% one and then any at 6%. The only reason I haven't been paying extra towards these right now is that I need to save for the move first and secure a job in LA. I'm wondering if I would be better served using my cash savings and (once I get a job) pouring them all into the 8% loan, which should eliminate it almost entirely, while taking out a car loan for my used Honda/Toyota. I wince even thinking about taking out another loan, but doesn't it make more sense to rid myself of that awful 8% loan if I'm able to get financing for a used car below 5%? (I do not actually know what interest rate I could get on a used car loan, but I have recently heard of others getting as low as 2%) As much as it would suck to take out another loan, I know that paying off student loans is like an investment with a cash return equal to the interest rate. If I use my extra cash instead to pay down my super-high interest student loans, I could soon turn my focus to the car loan and hopefully still prepay it a bit so as to avoid the full financing cost. I majored in finance at college and this makes sense to me, I'm just hesitant to go with this plan after recently reading MMM so adamantly warning against car financing.