My current car (Lexus RX 350) has 240k miles on it. It’s been flawless, for nearly 10 years of ownership. No reliability issues, but the suspension is harsher, it only gets 21 mpg, and I commute 100 miles per day, 4 days per week.

**Annual fuel costs are ~ $4700.**

I am considering a 2019 Toyota RAV4 hybrid. The new model has an EPA mileage of 39 mpg,and a price tag of ~ $40k OTD. Given my commute, the improved mileage would save me $2500 annually at $3.50 per gallon of gas. So about $200 per month.

I am considering a 2019 Toyota RAV4 hybrid. The new model has an EPA mileage of 39 mpg,

I have excellent credit, plan to put down $15k or so, and finance $25k. At 3% for 5 years, that makes the monthly payment $450. With an improvement of $200 monthly for gas, net cost would be $250 per month.

**So the question becomes – do I bank or dealer finance, or do I self-finance through a loan on my 403(b)?**

I know, I know – but bear with me.

The $25k would be paid with after tax dollars. We are currently in the 24% marginal bracket, plus another 9.3% for California. We have no kids, and the SALT cap means we’re spending an extra $2k per year in taxes already.

If I took the loan from my retirement account, the interest rate would be the same, but it would be pre-tax. So instead of $25k with after-tax dollars (calculated at 25000 x 1.33% = $33,250 of earned income), it would be $25k of earned income. I could then add more deductions to the 403(b) retirement auto-deduction, so the net would be $250 per month out of pocket, inclusive of tax savings, retirement contributions, and gas savings.

I know the Ramsey-ites would have a heart attack over this, but my job is very secure, we have a lot in our retirement savings accounts (we’ve probably over-saved for retirement), and we’ll have a secure (yes, it’s well-funded) state pension in retirement as well.

Thoughts?