Financing or Paying Cash? Sometimes The Choice Isn’t So Clear

We are now less than two months from a PCS move.  Deciding how to best manage our money right now is hard for me.  I like clarity in my financial planning:  what is coming in, what is coming out, what money is going to go where. As you know, things are rarely clear when you are PCSing.

Our recent car purchase is a perfect example. I have been saving money diligently, hoping to pay cash for a car, or at least take out a smaller loan.  We have a goodly amount of money in our savings account, which is also our emergency fund.  We could have nearly paid cash for the car, but we would have been wiped out.  We also could have put down a huge down payment, but it would have seriously compromised our cash reserves and I wouldn’t have been able to contribute to our 2009 IRAs before the April 15th deadline.  I’m not at all comfortable going into a PCS without the safety-net of that emergency money, so we ended up doing the thing that I absolutely did not want to do:  financing the whole car purchase.

It has been several years since we’ve had a car payment, and even with a great interest rate, I am absolutely shocked at the size of the monthly payments.  One part of me wants desperately to pay that car loan off RIGHT NOW.  The other side of me thinks that this was a good decision because financing the car gives us flexibility if any surprises come up during the moving process.  Once we are settled, I can review the situation and then work on getting rid of this car loan.

Sometimes the right choice is hard to make, especially if it goes against your usual thinking.  Flexibility is an important key to keeping your finances working smoothly.  Looking at the big picture and keeping your options open can help prevent disasters down the road.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Erin

    This post was the re-affirmation I needed for a recent purchase that we decided to do the same thing. We financed in order to protect our savings a little because we are on shaky ground with new employment right now.

  • Mary

    I always take the financing option for a couple of reasons. I don’t like having all my cash tied up in a vehicle and I can always pay the vehicle off if the interest rate is higher than what I’m earning by keeping that money in the bank, etc.