What does Dave Ramsey say about paying off a car?
Asked by: Jaime Wiza V | Last update: October 22, 2025Score: 4.2/5 (41 votes)
What is Dave Ramsey's rule on cars?
“Your cars, trucks, boats, motorcycles and other vehicles should not have a total value that exceeds half your annual income. Why? You don't want too much of your wealth tied up in things that depreciate. And cars, trucks and things with motors depreciate big time,” Ramsey posted on X.
Is it financially smart to pay off your car?
Yes, it is a very wise decision to pay off a car loan early if you have the funds early. The way to think about a car in general is that it is a depreciating asset ie, the value of the car decreases the longer you use it, unlike an appreciating asset such as a house or gold that increases in value as time progresses.
Why does Dave Ramsey not like car payments?
Better to buy a reliable vehicle for cash, save for years and become wealthy, and then buy a nice one to celebrate. Most people with car loans are poor or middle class. Which is why Dave is against them: they trap you in a cycle of payments and get you way too comfortable with a bad type of debt.
What does Dave Ramsey say about paying off smallest debt first?
The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest balance to largest balance, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment.
Use My Savings To Pay Off My Car?
What is the smartest debt to pay off first?
Paying off debt using the debt avalanche or debt snowball method could help you eliminate balances more quickly. With the debt avalanche method, you prioritize paying the most money to the account (usually credit cards) with the highest interest rate first, which can help you save money.
How long does it take to pay off the $10000 debt by only making the minimum payment?
1% of the balance plus interest: It would take 29.5 years or 354 months to pay off $10,000 in credit card debt making only minimum payments. You would pay a total of $19,332.21 in interest over that period.
Is $500 a month too much for a car?
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.
Does Dave Ramsey recommend buying a new car?
“We're not going to beat around the bush: The very best way to buy a car is to save up and buy a reliable, slightly used car (with cash),” claims Ramsey's site, Ramsey Solutions.
How long should it take you to pay off a car?
How Long Does It Take to Pay Off a Car? Most car loans take about 67 months (or five and a half years) to pay off. But that's if you're just paying the minimum each month. You can pay off your car loan faster by increasing your monthly car payment.
What's the smartest way to pay off a car?
The bottom line
Refinancing — or just making extra payments — are the best ways to pay off your car loan faster. Even if it's just a few extra dollars, you will reduce your debt and may cut a few months out of your loan.
What happens if I pay an extra $100 a month on my car loan?
Extra payments made on your car loan usually go toward the principal balance, but you'll want to make sure. Some lenders might instead apply the extra money to future payments, including the interest, which is not what you want.
Why did my credit score drop 100 points after paying off my car?
Paying off something like your car loan can actually cause your credit score to fall because it means having one less credit account in your name. Having a mix of credit makes up 10% of your FICO credit score because it's important to show that you can manage different types of debt.
What are Dave Ramsey's five rules?
How much should I spend on a car if I make $60,000?
A person making $60,000 per year can afford about a $40,000 car based on calculating 15% of their monthly take-home pay and a 20% down payment on the car of $7,900. However, every person's finances are different and you might find that a car payment of approximately $600 per month is not affordable for you.
What vehicle does Dave Ramsey drive?
Dave Ramsey BSMM. I daily drive a Jaguar XJ. It's a 2016.
What is the average car payment on Ramsey?
The average car payment is $734 for a new car and $525 for a used car. Your monthly car payment depends on the loan amount, interest rate, loan term, down payment and any trade-in value you can get for your current car.
Is it better to finance an older or newer car?
It may be easier to secure a loan for a new car than it is for a used car, and new car loans often come with lower interest rates. Used cars can be a good fit if you're on a budget and they generally cost less to insure; however, interest rates for used car loans are often higher than for new car loans.
What does Warren Buffett say about buying a new car?
So instead of buying a new car, Buffett prefers to buy used vehicles at reduced prices. “The truth is, I only drive about 3,500 miles a year, so I will buy a new car very infrequently,” he said, according to Forbes.
What is a realistic monthly car payment?
The average monthly car payment for new cars is $737, while used cars had a slightly lower payment of $520. ( Experian) 42.96 percent of vehicles financed in the third quarter of 2024 were new vehicles.
What is the 50 30 20 rule for car payments?
Set your car payment budget
50% for needs such as housing, food and transportation — which, in this case, is your monthly car payment and related auto expenses. 30% for wants such as entertainment, travel and other nonessential items. 20% for savings, paying off credit cards and meeting long-range financial goals.
What is the average car payment in Canada?
Canadians typically spend between $500 and $1,000 a month on their auto payments, according to Finder.com. A lot depends on whether the car is new or used.
What is a good credit score in Canada?
It depends on the scoring model used. In Canada, according to Equifax, a good credit score is usually between 660 to 724. If your credit score is between 725 to 759 it's likely to be considered very good. A credit score of 760 and above is generally considered to be an excellent credit score.
Should I pay off my credit card in full or leave a small balance?
It is not necessary or beneficial to carry a balance on a credit card for credit score purposes. To maintain a good credit score, it is best to pay off credit card balances in full every month.
What's the problem with using your credit card to take a cash advance?
Unlike withdrawing money from a bank account, a cash advance pulls money from your line of credit through your credit card. In addition to repaying the money you withdraw, you'll need to pay additional fees and interest as well. The fees for a cash advance can be substantial.