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Question: I am saving up for a new car. I put away, above and beyond the normal expenses on my current vehicle, fifty cents for every mile I drive, I currently have about $4,000.

A few of my friends have said, “You’re crazy. You have good credit, a Credit Union that will give you a good rate, and your car has 200,000 miles on it. Buy one next year with a big down payment and you’ll be fine and you’ll save on maintenance and gas.” Or even that for the good of my credit I should take out a loan for half the car regardless of how much I actually have saved.

Personally I think I can get another 50,000 miles out of my poor ugly little car and that would mean, provided nothing goes seriously wrong where I have to dip into savings, that I’ll have almost $30,000. Enough to buy any reasonable car on the market or even my dream vehicle, a Prius. Is saving up the full amount for a vehicle purchase excessively scrupulous? Matthew, Denver, CO

Answer: Bravo! I don’t think you’re being excessively scrupulous. You’re creating financial freedom of choice for yourself.

I’ve interviewed Jack Gillis a number of times over the years. He’s published the consumer-oriented Car Book for almost three decades now. I always learned something from him about cars and ownership. He always recommended a car maintenance and car replacement savings strategy along the lines that you’re pursuing. Of course, we’d both say that very few people have the discipline to do it. You do.

What’s more, you have a goal: To own a Prius or at least a hybrid.

So, don’t pay attention to the financial advice of your friends and I wouldn’t take out a loan simply to boost my credit score. However, if you keep on saving the loan versus cash decision will be your choice. When it comes time to retire your current car for your dream car the best financial move at the time may be to pay all cash. But you might want to take out a small auto loan if there’s an investment opportunity you’d like to take advantage of or you’d like to keep more savings on hand because you’re worried about losing your job. The bottom line is that it will be your choice.

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