Why's that? He didn't indicate he had any issues paying for the car/saving while paying that loan. A car being a necessity, it's not a bad way to build initial credit. I did the same (my first car was an 03 2.5RS 4EAT), and I have very nearly a perfect credit score today.
On general principle of how to handle personal finances, I agree with your outline. However, ESPECIALLY right now, there is very little that qualifies as an appreciating asset. That's a model from when the economy was on the up and housing was infallible (which was never true anyhow).
I do agree with the guy earlier on who said don't pay the car off with the settlement though. I don't know what your interest rate is, but if it's <3% or so, I say ride it out to the end, or to the last year at least. Granted if your financial situation changes, different things make sense.