If you can afford to pay cash then take the loan and invest the cash elsewhere, and if you can beat the interest on the loan then come back to write better financial advice than this. And even if you can’t you’d at least have done something interesting.
We bought a reliable car for 22k without financing. Our next car will be bought when this one dies. It’s not necessary to have a new car every couple of years.
Dave Ramsey is an out of touch asshole though.
Normies love larping his boomer takes tho haha
As a pedestrian, I’m glad not to support big bike chain lube, I’m saving dozens of pennies annually
Oh, you’re one of those shills for the shoe-leather industry! 😜
Dave Ramsey hasn’t tried to buy a reliable used car in the last decade, at least. You aren’t going to find anything under about $10k that’s actually reliable where I am. A mid-90s Toyota with 300,000 miles maybe, but not anything under 150,000.
With the $554 average new car payment in the original post, you can afford that $10k new-to-you used car outright in cash every 18 months.
Average price of a used car in the US, right now, is $29,000. Which means that for a $554 payment, it’s going to be 5.4 years rather than 1.5. From there, you need to figure out how many miles you put on a car in a year, make some rough guesses about how many miles the average car has left before the cost to repair exceeds the cost of replacing, etc. Obvs. a high mileage used car is going to require significantly more maintenance than a new car will (…in most cases, as long as you aren’t buying a new Land Rover or Jaguar), so you’ll need to figure that in as well. You’ll probably want good insurance, even if you’re only required to carry minimal liability insurance, because any accident could be catastrophic for your finances if you can’t afford to repair your car.
It’s a bit of a death spiral; wages are still too low, car prices are too high.
Sure, but in 2023, someone could already be selling a 2022 as used. That $29k number is going to be skewed by those who sell younger cars. You can still find used cars much cheaper than this.
For that $554 payment, you would need $6648 in additional yearly maintenance costs on an older vehicle to compare. That’s like a new engine or transmission, every year!
Anecdotally, I drive a 32-year-old car that I purchased, coincidentally, for $3200 around 7 years ago. I haven’t spent even close to $6648 in maintenance that entire time (probably not even another $3200).
To my original claim - finding something that’s reasonable mileage, and in good mechanical condition, for under $10k, is quite a challenge at this point. I sold a 2008 Honda Civic Si with >200,000 miles last year that was not running, had rust, and generally needed a fair amount of work, and had an asking price of $4k. I got fifty offers in under 12 hours. It was crazy.
I walk or bike to about 90% of the places I need to go. That said, I also recently bought a vehicle for $1200. Works fine except the fuel gauge is broke so I have to just keep it topped off. My neighbor is trying to sell his Kia Rio for $1500. Works fine. It’ll last at least another 3 or 4 years. Likely more. I have a friend whose son totaled out his car. He wanted another. I recommended a car that was in the $1000 to $2000 price range. He didn’t want it. He took out a loan and got a very nice, very sporty car. Then he got in another wreck and totaled it out too. So then he goes and gets himself another expensive car. I just don’t understand.
If I took my bike to town, it would take me about an hour, give or take. To get home would be about four hours. It’s 15 miles, one way, with about 2200’ of elevation change.
Sounds like you need a zip line! 😂
That’s just one of the many fun things about living in the mountains.
sure, maybe. but FUCK Dave Ramsey.
I’m out of the loop. What’d they do?
He plays a daddy capitalist on teevee while being total boomer.
Also his debt pay off advice is bad financial advice. “Snow ball” method 🤡
Entire grift is dunking on peasants and blame their personal failings for systemic issues.
Some of his advice (mainly the first “baby steps” of paying off debts and getting some money saved) is reasonable enough. Snowball method of paying off debt may not be the most mathematically advantageous, but it does give psychological quick wins to those who may need it most. Paying off high-interest loans first doesn’t mean much if you get frustrated and give up. Setting a budget is also important.
Once you get past that his advice is pretty awful though. Yes, I use credit cards but I pay it off. Yes, I have a car loan but its interest rate is so low I pay a rounding error’s worth of interest through the life of the loan. No, I’m not paying my mortgage off on a 15-year schedule because its interest rate is plenty low as well and I’ve got better things to do with my paycheck.
Snow ball method’s great when you’re really up shit’s creek and aren’t going to be done paying everything off anytime soon anyway.
By paying off the smaller loans first, your total minimum monthly payment is reduced quicker, leaving you better off psychologically because you finally have money to spend on food, but also you can then use the extra money every month to pay off the debts with worse interest rates.
Personally I wouldn’t fully adhere his snowball method OR the optimal “high interest first” strategy. I’d first identify the low hanging fruit and then look at the rest as a tradeoff between “how quickly could I pay this off” vs “how much would not having this payment anymore improve my life” vs “how much is this going to fuck me in the ass with interest if I don’t pay it off ahead of schedule”.
Memes circulating with this dude right now, even if positioning him as a chud, are a way to launder this dude as just a legit money guy. Sure, he has some basic, broad financial advice you can consider if you can see through all the Jesus and have no other options, but more than anything else, he’s a vile human being.
Eat religious shit dave ramsey.
If you pay 500$ a month for 30 years at 5% interest compounded monthly you would contribute $180k and would have $416,129 so not really a million. You would need a little less than 9.5% interest to get a million. 2% interest is only getting you $246k which when you take into account inflation 2-3% normal average minus 5% one of the higher realistic interests that is what you are actually making .
If you pay 500$ a month for 30 years at 5% interest compounded monthly you would contribute $180k and would have $416,129 so not really a million. You would need a little less than 9.5% interest to get a million. 2% interest is only getting you $246k which when you take into account inflation 2-3% normal average minus 5% one of the higher realistic interests that is what you are actually making .
Ramsey is always very optimistic about investment returns. His advice isn’t too bad though.
Honestly if someone were to have said that garbage to him 40 years ago he prolly would have called it unAmerican and communistical.
It is weird to watch the ethical scoliosis happen in real time over the decades.
Insurance payments for teenage boys are INSANE. $100-150 is the usual but my buddy is paying literally $300 a month on a year 200X Tahoe that he bought for $700 and fixed himself. Its the cheapest option on his families insurance and his parents won’t let him switch.
That’s not even payments that’s INSURANCE.
Giving teenager a tahoe is a liability lol
Yup, when I was 18-23 I was the primary driver of our car, but we put the insurance and name under my gf (now wife) and it was half the cost if I had gotten the insurance instead.
Millions? I don’t think so. There is no investment that would turn $30K or whatever into millions that was safe enough to work for the majority of people. But it would be a significant help.
That being said, for most people, the amount you’d spend to live in a place where a car isn’t needed or constantly paying for ride share or taxis greatly exceeds the amount you’d save by not having a car for the vast majority of people, and that’s not even getting into the ableism issue.
And sure we could get into buying a cheaper, used car or whatever, but in the long term the maintenance costs, having to buy another car sooner, and other financial risks to cars outside of warrantee over a lifetime will add up similarly unless you’re really lucky or can repair your own cars.
and that’s not even getting into the ableism issue.
Infrastructure that requires people to drive is far more ableist than the inverse. As many people with a disability can’t drive at all (or driving is a significant challenge).
Right. That was what I was saying.
I didn’t get into that issue, but it’s a major one, and not just for people confined to a wheelchair who might be able to get assistance through government sponsored programs, but also people with certain types of PTSD, Autism, ADHD, anxiety issues, etc., (including lots of veterans) or people with vision issues or other disabilities that aren’t considered “enough” of a disability to get help, but make it difficult or impossible to drive.
$554 a month at 5% growth is $440k after 30 years. So yeah not millions.
S&P averaged about 10% over the last 30 years. That means it would be over 1.2 million.
Working life is more like 40 years. Those back end years are huge, it goes up to 840k. Which is why you’re supposed to start on your 401k right away. Of course 99% of people don’t get this talk until they’re 40; go through a poverty period after high school; or never make it out of paycheck to paycheck living for other reasons. (Like medical debt)
Very few people get the good pay, good contributions, and consequently the good retirement. We also completely lie to people about retirement. We tell them they have to scrimp and save so they aren’t homeless when they’re 80. In reality half of us will be dead by 75 and half again by 85.
And sure we could get into buying a cheaper, used car or whatever, but in the long term the maintenance costs, having to buy another car sooner, and other financial risks to cars outside of warrantee over a lifetime will add up similarly unless you’re really lucky or can repair your own cars.
Buying a low-mileage used car and even paying for a shop to do the maintenance is almost always cheaper than buying something with $500+ monthly payments. I don’t actually agree for the most part with Dave Ramsey (even about the entirety of this post)…but he’s correct that it is cheaper.
Most Americans have less than $1,000 in savings. So any car for that amount is not going to survive long. So most Americans still get loans for used cars.
And with interest rates so high, a payment of $550 will only get you about $25K. That’s enough for a decent new small sedan, but if you have kids (especially if 3 or more), that’s probably the minimum needed to get a used minivan that will last a while.
Anything else is only going to last a few years at best before needing major repairs.
I just did an autotrader search and in my (very unaffordable) area, there were lots of serviceable cars under 10k. If you live in a place with a garage you can even buy a used EV and eliminate whole categories of maintenance costs.
The whole point is to buy something that requires smaller or no monthly payments, and then bank the savings and eventually buy something better. “A couple of years” can do the trick in some cases.
$10k for a serviceable minivan or other vehicle that would work as a primary car for parents? What about the problem that most households need two incomes and very few can commute together due to different schedules and locations and adding even an extra hour or two of daycare in order to share a car is often as much as a second car payment.
As I said, $25k is probably plenty for a small sedan for a single person who only uses it for commuting and grocery shopping, but not likely for people with multiple children that a small sedan or coupe would not work, households with multiple income earners, households with teenagers who also need a car to work, or all the other scenarios where a single, small, used sedan that’s just good enough for a short daily commute is reasonable.
$550 in car payments for a houshold is not unreasonable for the vast majority of households and usually doesn’t equate to frivolous spending.
$550 in car payments for a houshold is not unreasonable for the vast majority of households and usually doesn’t equate to frivolous spending.
I don’t think I necessarily disagree with this but the reality is that when you buy new you’re always paying more. When you buy new on credit, you’re paying even more than that.
So, like I said in the beginning, I don’t 100% agree with this dude about even this whole post. But it is cheaper to buy used and even pay for the maintenance. It’s a point almost not worth making because of how obviously correct it is.
The whole, where do you live thing is super important. The last time we moved my wife and I were very adamant about a specific maximum commute length in car, or a length by transit. And getting somewhere to live that was easy to commute from. We compared the price including mass transit commute at the max distance to anything we were getting closer with the commute included from there too.
The differences were absolutely significant. Many places were cheaper to live an hour away, even with car payments, insurance, and gas. That’s absolutely ridiculous and part of so many problems from climate change to motor vehicle deaths.
We need to enforce mixed development, the people who work in an area need to be able to afford living in that area. Pushing the workers out should not be acceptable.
the people who work in an area need to be able to afford living in that area.
I read an article in my local paper that 95% of the workers in my town don’t live in town. And while there are new apartment buildings going up, paying $2000/mo for 300 sq ft without a washer/dryer or even an oven is not going to be attracting much of that 95% back.
Unless we get serious about building, that’s all that’s going to be available. Developers love the idea of cubicle sized housing.
That being said, for most people, the amount you’d spend to live in a place where a car isn’t needed or constantly paying for ride share or taxis greatly exceeds the amount you’d save by not having a car for the vast majority of people, and that’s not even getting into the ableism issue.
I disagree with everything else you say, as the other replies to you point out. But this is a really good point.
That’s really exorbitant insurance. I don’t know where he lives or what is situation is but $350 a month is insane.
You can buy a very nice e-bike every year with that money.
I was unemployed for most of last year and let my insurance lapse. I’d be lucky if anyone would insure me for $350/month.
I’d put money on a pretty messy driving history for the insurance to be that much.
Two cars (~$50k each), two adult drivers, one accident in the last 7 years, no tickets = $453/mo. Fuck California and the weak cunt Newsom that can’t get these greedy fuckers under control.
Wouldn’t surprise me if that neighbour has been in a few accidents, gotten a bunch of speeding tickets, and/or is a young male.
Also depends on what they are driving.
It drives me crazy when i get spam that says they can save me money on my car insurance
O rly? How you gonna beat $0?
I told one of these spam callers that my license has been legally revoked. It has been almost 15 years since I last got one of those calls. They used to be something that happened, at least, a few times per day.
In Denmark it is required by law that you have a bare-minimum insurance (to cover if you damage someone or something else). Is this not required in your country?
The point is probably that they don’t have a car to begin with
Don’t be too hard on them, in Europe we get very little spam calls. Most people even answer unknown callers.
I fail to see how this is relevant to my comment :D
I don’t own a car.
I realized I had asked a stupid question after posting.
I paid $830/month for a moderately priced car at only 2.9% for a few years. 1/3 my current yearly salary in full. It wasn’t smart, but I beat inflation at that rate. That car let me and my wife travel so much in our early marriage and it was so worth it. The car is more expensive now then when I bought it.
I love that car and it brought me joy. It’s paid off now.
Tomorrow is not promised. Save for the future but don’t neglect being happy today. Go live a little.
Spoken like someone who’s long since stopped worrying about having to commute without mass transit available.
If mass transit is available and reasonable then yeah, go off. But otherwise please stop blaming the victims of Capitalism.
Move somewhere you have mass transit wtf
Sure, I’ll sell my nice house in the countryside and use the money to buy something not even half the size in an urban centre so I can have the privilege of being able to use a bus. No thanks.
You are the problem.
Let’s all abandon the countryside and move to the city rather than improving transport links for rural communities then.
IDGAF about how farmer Jones is going to get to his farm at 5am every day to feed the cows.
idgaf about people who spend their days causing climate change, yes. That includes both people who dig up carbon and cow “farmers”.
Cow farming was just one example of work that can only really be done in rural locations. Presumably you’re not against the farming of vegetables?
