Should I Take on Student Loan Debt to Buy a New Prius?

Our Prius needs repairs. We trust our mechanic and the repairs are legit. It has 170K+ miles on it and the newer models get even better gas mileage. We currently have two cars, but since we mostly work from home, we don’t really need both. I thought we could consolidate and get one nicer Prius.

I was shocked to see that even a 2016 Prius is going for like $18K. The base model for the Prius Prime is $28,500 and qualifies for a $7,500 tax credit. So, $21K to buy a new Prius with electrical capabilities, basically zero miles and is under warranty, with a negligible difference in price from the used hybrids.

The long and short of it is, once you factor in our trade-in values, savings and the tax credit, we’d still need a loan of about $3,500. (I’m aware that we’d have to wait to get it back until we file our taxes.) I know it would be ideal to wait and save, but our Prius needs repairs now.

I’m also an online student but pay for my education with mostly grants and scholarships. Today I logged into my financial aid account to reject my student loan offers like I usually do and something caught my eye. It says the government pays the interest while you’re in school and for six months after. I have two years left. Basically, we could get an interest-free loan. I feel confident we could pay it back before any interest starts accruing.

It seems like a great deal, but my inner frugality is antsy. Is taking a loan ever a good idea? For reference, we are very responsible and have excellent credit because we always pay our bills and have a 100% success rate paying loans off early, though we avoid them when we can. If it helps, it’s just me and my husband, and we don’t want kids.

-Frugal Student