Car Purchasing Advice from Dave Ramsey: Middle-Class Americans Should Steer Clear of New Vehicles
In a financial world where choices abound, Dave Ramsey, a renowned financial expert, advocates a different approach when it comes to choosing between new and used cars. According to Ramsey, the decision represents a trade-off between appearing wealthy and building wealth.
Ramsey's concern revolves around the rapid depreciation of new cars, which can lose up to 60% of their value in the first five years. This, he argues, makes new cars a poor store of value and a significant drain on family wealth.
Financing new vehicles, Ramsey cautions, traps families in a cycle where money that could be used to build wealth is instead tied up in depreciating assets and interest payments. This is a key reason why many middle-class families "appear successful while remaining financially vulnerable."
Leasing, too, is not immune to Ramsey's criticism. He argues that it benefits dealers more than consumers, preventing buyers from ever building equity in a vehicle. Leasing, like financing, is seen as a wealth-destroying habit for middle-class consumers.
In contrast, Ramsey recommends purchasing used vehicles—ideally with cash—that fit your budget and daily needs. His rule of thumb is that unless you have a net worth of $1 million or more, buying a used car is the smarter financial choice.
Ramsey stresses practicality over luxury, urging buyers to choose vehicles based on factors like safety, reliability, fuel economy, comfort, and suitability for your lifestyle—not emotional preferences or status symbols. The focus should be on what’s necessary, not what’s nice-to-have.
Ramsey's broader financial philosophy is to redirect money that would otherwise go toward car payments, leasing, and other wealth-destroying purchases (like timeshares, frequent dining out, and extended warranties) towards saving, investing, and debt elimination. By avoiding debt and prioritising paying cash for depreciating assets, families can break the cycle of “accepted financial behaviours” that prevent wealth building and instead move toward true financial independence.
In essence, Ramsey's advice is to avoid new car purchases, buy used cars with cash, and shift spending habits from consumption to saving, investing, and debt repayment to build long-term wealth. By following these principles, Ramsey believes middle-class families can escape financial vulnerability and make meaningful progress toward wealth creation.
- Dave Ramsey, a financial expert, advocates for buying used vehicles with cash instead of new ones to avoid rapid depreciation and high interest payments, which can drain family wealth and lead to a trade-off between appearing wealthy and building wealth.
- According to Ramsey, leasing and other wealth-destroying purchases like timeshares, frequent dining, and extended warranties should be avoided in favor of saving, investing, and debt elimination to build long-term wealth.
- When it comes to personal-finance decisions such as car purchases, Ramsey suggests focusing on practical factors like safety, reliability, fuel economy, comfort, and suitability for your lifestyle, rather than emotional preferences or status symbols, to make meaningful progress towards wealth creation and financial independence.
