The Simple Dollar’s New Financed Car
Not too long ago I wrote a post asking whether PF blog readers were looking for perfection or honesty? Just from the few comments I received it seems readers say they value honesty more than perfection.
Which is good news for us bloggers because it’s a lot easier to be honest than perfect.
We got to see this same question answered on a larger scale when Trent @ The Simple Dollar wrote about buying a new car, a 2009 Prius. And while quite a few comments admired Trent’s honesty it looks like a lot more were expecting perfection.
Knowing that TSD has one of the higher PF blog readerships, most of you are probably already up to speed on the situation. But in case you don’t follow that blog here’s what happened:
- Trent was in the market for a car.
- He spent a long time doing research.
- He crunched the numbers.
- He bought a 2009 Toyota Prius (w/financing).
- He got a lot of grief on his blog.
I have to admit that I was surprised by his decision.
I also have to admit I enjoyed reading the comments that were blasting him. I think this was in part because I’m usually on the receiving end of that situation, so it was fun to see somebody else take a hit once in a while.
But after actually reading Trent’s detailed analysis of this purchase, I had no problem with it. Here’s why:
- He stated they were looking for a commuter car with great fuel economy. – it seems to me that the Prius is right near the top of every fuel economy chart I’ve seen.
- He said they had enough in savings to pay for the whole thing. – A long time ago I asked what people thought of interest free financing offers. To me it looks like Trent would be a fan of interest free offers, since his savings gets him 3% and his loan is at 4%. A few days later he posted his own thoughts on this subject.
- The car is cool – A friend of my wife drives a Prius and my wife is always telling me how cool it is. Who doesn’t like cool things?
- I don’t really give a darn. – Ok, clearly I do since I left a comment and I’m writing about it now. But what I mean to say is that it is Trent’s life and he’ll have to live with the consequences of his decision, not me. Personally I think one of the worst financial decisions I’ve made was buying our current van . That is because it was more than we could afford. Somehow I doubt that Trent will feel the same way (since he’s sitting on a pile of cash).
While it’s true that you can find posts on TSD about how great it feels to pay cash for cars, there is also a post from last April where Trent gave a rational for not paying in full.
Also, remember that what you have saved for a down payment isn’t necessarily what you have to pay. If you have 40% saved up and can get an astoundingly low interest rate with only paying 20%, you don’t have to cough up that extra 20% – keep it for your emergency fund or for saving for the next car you’ll have to buy.
I understand that people disagree with Trent’s method, but the manner in which they expressed it surprised me. I couldn’t believe how many people said that he’d lost all credibility with them.
His tips are no longer useful to them…REALLY?
One thought I had is that they came down on him so hard because he is successful at what he does. It’s fun to put people on a pedestal to then knock them off of it. For example, not too long ago Frugal Dad detailed his decision to go back to extended cable service after a year of basic cable. He got 70 comments, very few agreeing with his decision, but none of them were shocked or outraged either.
So I pose the question yet again, this time without me in the center of it. Do we PF readers prefer honesty or perfection?
Until next time,
-DD
Gas Prices – The Silver Lining of the Recession
Community In Action – Big Snow Edition
People are annoyed because principles tend to not change. Trent(The Simple Dollar) has acted like a man with staunch principles to his credit over the years, and then just quickly retreated from a pretty big one about paying cash for a used car. I didn’t expect that from him. At the same time, betrayed and upset emotions from commenters seem pretty overblown and are probably reserved to those who held in too high esteem.
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.”
My take is not that the people that were upset with his lack of perfection. It was his honesty that they called into question. Not that he lied about any facts, but that he has previously recommended against such action and then rationalized it when it came to his own situation.
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.
I agree with both Happy Rock and Double Eagle. Keeping to certain principles requires self-honesty; I don’t think readers were upset that Trent lied to *them* and deceived them, since his financial choices don’t directly affect his readers. It was that he wasn’t honest to his own principles. Looking at it that way, I do understand his readers’ feelings.
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 heard Prius is very fuel efficient car. I missed the post about honesty and perfection. My selection is perfection.
Hey – At least Trent was honest. I know that I tend to look for people who practice what they preach when it comes to giving advise but nobody is perfect. If you are going to make a decision that seems contrary to your normal point of view – be honest. People can eventually justify anything so why not look for progress over perfection?
Trent has worked hard, done the research and made a decision. That does not mean I will stop reading his site or looking at his advise.
Quite frankly I don’t think we know what we want! I think it depends on the day you’ve had at work, what’s happening in your life at the time and the attitudes of those around you and as they change all the time, you’ll often find that your opinion about perfection or honesty will change with it 🙂