Gen II or III?

I say go for the newer one. 20k miles more is not a big deal and $1400 difference is small for a 5 year newer car, all other things being equal. A 5 year younger hybrid battery would be why I would feel better about the newer one. Some here are going to warn you about blown head gaskets, oil usage, etc....but I believe those problems are pretty rare. I know plenty of people with gen3 that have over 200k miles with only general maintenance, mostly just oil changes, air filter changes and the like.
Good luck whatever you choose!

 

2008 is a beast, albeit it an 11 year old car, you likely can't go wrong.
for gen 3, do some search diligence on the egr circuit, inverter failure and head gasket failure.

 

+1!
Get the G3 and check the oil.
Consider establishing a relationship with an independent (NOT dealer!!) mechanic and have them do some of the mid-life maintenance items like EGR cleaning and transaxle fluid replacement.

If you never open the hood to check the oil level then, really, you need to be driving another and perhaps newer vehicle.

People always get hit by the bus that they don't see coming, and with an 11-year-old car you are much more likely to experience HVAC, suspension, display, braking, electrical, and other aging problems that will be troublesome and expensive as well as things like battery, inverter, and other hybrid-related issues that are known to be more prevalent in Priuses.

Either way?
Hope is not a plan.
PLAN on replacing the traction (large) battery in either car and start saving accordingly.
The average new car payment is now over $530 a month and there are actually people signing contracts for 72 and even 84 month loans on that monthly amount.....so for me, it's easy.
Put money in the bank for things like batteries, brakes, etc instead of making high (or in my case....ANY) car payments.

Your call.

The G2 may be a 'beast' but beasts get old, and in the words of the great Philadelphia philosopher Robert "Rocky" Balboa: "Time, you know, takes everybody out. It's undefeated."

 

I had a 2007 Gen 2, and subsequently 2 Gen 3 models. In my opinion, the Gen 3 is a substantially more civilized and mature vehicle.