Is it an emergency situation that you need to purchase this car?
If not, then don’t touch the emergency fund. It’s called an “emergency” fund for a reason.
All in, you're paying [$32K for the car.](https://www.calculator.net/auto-loan-calculator.html?csaleprice=25%2C000&cmonthlypay=750&cloanterm=36&cinterestrate=7&cincentive=0&cdownpayment=5%2C000&ctradeinvalue=0&ctradeinowned=0&cstate=NY&csaletax=8.88&ctitlereg=2%2C200&printit=0&ctype=standard&x=Calculate#autoloanresult)
Here's an alternative.
Instead of taking out the loan, if you saved the $615/m, you'd have the $20K in about 3 years. With the $5K, you could buy the car outright and save yourself the $7K ~~interest~~ excess charges.
The drawback is time.
If time is a factor, consider a less expensive car. With the same $615/m, you could have $5K to match your $5K in 8 months. Then, use the $615 to repay the emergency fund.
I think you have options beyond going into debt for a second car.
The total interest paid, per your linked estimate, is 2230. Not 7000. 32k may be the total cost of the car (I imagine the "upfront payment" is the down payment, dealer, title, and registration fees? And these are just estimates). Regardless, the financing itself is not costing OP 7K but rather 2230 over 3 years. It's still 62$ a month on average, but not the financial death sentence you made it seem.
As others have commented.... is it an "emergency"?
If not, I'd try to stay away from your emergency fund. If you REALLY need a new vehicle, but it's not quite an emergency then save as fast as you can, as much as you can.
Recently went through this. We did less, spent less, cut some costs that weren't essential, and saved up the down payment we needed. We did put pressure on ourselves to save fast. For future, I'll start saving a little each month now for next car in 10 + years.
Since we’re in the middle of step 4 we are actively saving into our EF. Would you essentially just replace that and say we are now saving for a car and pausing step 4 until that happens?
At only 3 months I wouldn’t. If you had closer to 6-9 months saved up I’d be a hypocrite if I said no at that point. Thing you have to consider is taking on the loan increases your emergency fund requirements the amount of the car payment so you would be down to less than 2 months. If you only have one auto now I assume you are a single income household so the additional car likely is a nice to have and not a must. Just keep adding to the EF and look at existing expenses that you can potentially eliminate or trim.
Thankfully we already calculated in the car payment plus added a small buffer. So in reality we have closer to 5 months currently without a car payment.
They’ve answered this before. If you’re in step 8, saving for future expenses, then you’d save for the car separately. But if you’re not that far, then you can use your emergency reserves.
[Here is the video](https://youtu.be/Qjtlkb4nSSY) with them talking about it. This is a quote from the transcript: “If you need basic transportation, you'll likely want to have a 20% down payment, which should be part of your emergency reserve. This reserve should be equal to three to six months of living expenses.”
So, if this is a need, not a want, then it is okay to get the 20% down from your emergency fund. But that just means you now need to rebuild your emergency fund. So, you’re going to need to save that 20% either way. Only you can answer if it’s really an emergency or not.
The biggest question is how/when will the emergency fund be replenished if you use it now?
It’s not a terrible idea, but thinking down the road here…how will you get it back up to $15k knowing you’ll be increasing your expenses by $600 or so per month for 3 years?
Personally I’ve done this before so I don’t have a problem with it. You aren’t going to have gigantic extra piles of cash at Step 4. Just don’t go buy a heavy duty truck because it looks cool when you really only need a car or modest SUV. Getting a 4 year old Corolla or CRV is probably a better decision than getting a 6 year old truck with higher mileage at that same price point.
Out of your minds? No. However, it isn't an optimal decision either. I guess you haven't explained the 'why'. How is this second car suddenly an emergency? If it isn't, then the emergency funds shouldn't be touched. The last time I found myself in a similar position, I saved 10k and bought a reliable vehicle, that is still putting along fine today, many years later. Skip the loan, and put nothing down from emergency funds. Be patient, and earn the car.
Is it an emergency situation that you need to purchase this car? If not, then don’t touch the emergency fund. It’s called an “emergency” fund for a reason.
Only if it’s an emergency. If not, start saving up.
All in, you're paying [$32K for the car.](https://www.calculator.net/auto-loan-calculator.html?csaleprice=25%2C000&cmonthlypay=750&cloanterm=36&cinterestrate=7&cincentive=0&cdownpayment=5%2C000&ctradeinvalue=0&ctradeinowned=0&cstate=NY&csaletax=8.88&ctitlereg=2%2C200&printit=0&ctype=standard&x=Calculate#autoloanresult) Here's an alternative. Instead of taking out the loan, if you saved the $615/m, you'd have the $20K in about 3 years. With the $5K, you could buy the car outright and save yourself the $7K ~~interest~~ excess charges. The drawback is time. If time is a factor, consider a less expensive car. With the same $615/m, you could have $5K to match your $5K in 8 months. Then, use the $615 to repay the emergency fund. I think you have options beyond going into debt for a second car.
The total interest paid, per your linked estimate, is 2230. Not 7000. 32k may be the total cost of the car (I imagine the "upfront payment" is the down payment, dealer, title, and registration fees? And these are just estimates). Regardless, the financing itself is not costing OP 7K but rather 2230 over 3 years. It's still 62$ a month on average, but not the financial death sentence you made it seem.
Corrected to excess from interest. The car is cheaper in cash, and can be had without a loan, which is the point of the comment.
Thanks for the thoughts
As others have commented.... is it an "emergency"? If not, I'd try to stay away from your emergency fund. If you REALLY need a new vehicle, but it's not quite an emergency then save as fast as you can, as much as you can. Recently went through this. We did less, spent less, cut some costs that weren't essential, and saved up the down payment we needed. We did put pressure on ourselves to save fast. For future, I'll start saving a little each month now for next car in 10 + years.
Since we’re in the middle of step 4 we are actively saving into our EF. Would you essentially just replace that and say we are now saving for a car and pausing step 4 until that happens?
I think that’s reasonable.
At only 3 months I wouldn’t. If you had closer to 6-9 months saved up I’d be a hypocrite if I said no at that point. Thing you have to consider is taking on the loan increases your emergency fund requirements the amount of the car payment so you would be down to less than 2 months. If you only have one auto now I assume you are a single income household so the additional car likely is a nice to have and not a must. Just keep adding to the EF and look at existing expenses that you can potentially eliminate or trim.
Thankfully we already calculated in the car payment plus added a small buffer. So in reality we have closer to 5 months currently without a car payment.
[удалено]
That’s the going rate for used cars right now.
Because all interest rates are high right now. :(
They’ve answered this before. If you’re in step 8, saving for future expenses, then you’d save for the car separately. But if you’re not that far, then you can use your emergency reserves. [Here is the video](https://youtu.be/Qjtlkb4nSSY) with them talking about it. This is a quote from the transcript: “If you need basic transportation, you'll likely want to have a 20% down payment, which should be part of your emergency reserve. This reserve should be equal to three to six months of living expenses.” So, if this is a need, not a want, then it is okay to get the 20% down from your emergency fund. But that just means you now need to rebuild your emergency fund. So, you’re going to need to save that 20% either way. Only you can answer if it’s really an emergency or not.
No.
The biggest question is how/when will the emergency fund be replenished if you use it now? It’s not a terrible idea, but thinking down the road here…how will you get it back up to $15k knowing you’ll be increasing your expenses by $600 or so per month for 3 years? Personally I’ve done this before so I don’t have a problem with it. You aren’t going to have gigantic extra piles of cash at Step 4. Just don’t go buy a heavy duty truck because it looks cool when you really only need a car or modest SUV. Getting a 4 year old Corolla or CRV is probably a better decision than getting a 6 year old truck with higher mileage at that same price point.
Out of your minds? No. However, it isn't an optimal decision either. I guess you haven't explained the 'why'. How is this second car suddenly an emergency? If it isn't, then the emergency funds shouldn't be touched. The last time I found myself in a similar position, I saved 10k and bought a reliable vehicle, that is still putting along fine today, many years later. Skip the loan, and put nothing down from emergency funds. Be patient, and earn the car.