I have an emergency fund and some money saved to buy a car which is my need. The newer versions of the car can be bought if I pull a major portion of the money from my emergency fund. My job would give me enough cash to enter back enough money for the emergency fund after a month. Would it be a wise decision to use that money?
I don't currently have a car. I use Uber for office but it's not very convenient as late nights it's not safe to drive with a stranger.
The purpose of the emergency fund is to enable you to pay for unplanned necessary expenses without going into debt.
You know that cars don't last forever and eventually need to be replaced. Ideally, you would have a "car replacement fund" which you contribute to a little every month. (Essentially, it is a car payment to yourself.) Then when it comes time to get a replacement car, you have money set aside for this purpose and know exactly how much you can spend.
However, in your case it seems that you don't have enough money in your car replacement fund for the car that you want. There are a few different causes that might have led to this situation:
Due to unforeseen circumstances, you need a replacement car before you thought you would need it.
You find that your planning was not quite right, and you weren't saving as much as you need.
You are trying to buy a more expensive car than you need.
If a replacement car is a necessity, two of these are emergencies, one is not.
If you don't have enough cash set aside for a car, it is certainly better to spend your emergency fund and pay cash than to borrow money to buy the car. Only you can decide if the car you are looking at is appropriate for you, or if you should be looking at a less expensive car. After you purchase the car, build your emergency fund back up first, then start saving for your next car.
The first thing that strikes me is: Is this a time-limited offer? Because if you can expect the offer to still be valid in a few weeks, why not just wait that month (which will earn you the money) and buy the car then?
The second thing you need to consider is obviously the risk that in the interim, there will be an actual emergency which would require the money that you no longer have.
The third thing to consider is whether you need the car now. Do you require a car to get around and your current one is breaking down, perhaps even to the point that repairing it would cost you more than buying a new car and it is currently not safe to drive? If so, compare the cost of repairing to the cost of buying; if the difference is small, and the new car would be more likely to be reliable than the old car after spending the money, then it can make sense to buy a new car and perhaps sell the old one in its current condition to someone who likes to tinker. (Even if you only recover a few hundreds of dollars, that's still money that perhaps you wouldn't otherwise have.)
The fourth thing I would consider, especially given the time frame involved, is: Can you get a loan to buy the new car? Even if the interest rate is high, one month's worth of interest expense won't set you back very far, and it will keep the money in your emergency fund for if there is an actual emergency in the weeks ahead. Doing so might be a better choice than to take the money out of the emergency fund, if you have the opportunity; save the emergency fund for when that opportunity does not exist.
And of course, without knowing how much you earn, take care to not end up with a car that is no more reliable than what you have now. Without knowing how much you earn and what the car you have in mind would cost, it's hard to say anything for certain, but if the car you have in mind costs less than a month's worth of net pay for you, consider whether it's likely to be reliable. Maybe you are making an absolutely stellar pay and the car will be perfectly fine; but there's that risk. Running the car by a mechanic to have it briefly checked out before buying it may be a wise move, just to make sure that you don't end up with a large car repair expense in a few months when the transmission gives up, for example.
The mix how how you present this feels contradictory. You would pull a 'major' portion from the emergency fund (EF), but at the same time, you'll replace it in a month.
The first bit scares me, this is not the purpose of that fund, and the issue is the aspect of money that's psychological. Money is a habit, if you justify this use of the EF now, it gets progressively easier for this purchase or that, and the fund loses its intended purpose.
If the second half is accurate, that your income would replace that money in a month, i'd say the fund wasn't fully funded to its proper level, 6-9 months of all expenses to get you though issues as bad as a job loss.
The great thing I see in your question is what's missing. You're not looking to buy a car with a loan. That puts you in a good situation, and should push those answering to cut you some slack on the one month "bridge loan" from your own savings.
Edit - OP add 2 key points, His EF is 3 years expenses (wow, kudos to him!), but he's living like a student (i.e. with parents, which keeps his costs low). If this latter observation seems judgmental, I'll re-edit. The finances of everyone would be far better off if we adopted multigenerational living. The young could save as Fahad is doing, and when parents retire, they can know they are cared for. In the US, I'd say "when you move out, your expenses will go up drastically," but in this case, that may not happen, or not soon. This is my observation the world is a big place and our answers need to fit the OP's situation, not assume our own standards apply to all.
Buy the better car. You saved. You earned it.
