Finance guru Dave Ramsey is popular because he pulls no punches and provides financial instruction through common-sense, actionable tips. On the subject of shelling out $25,000 to buy a car, Ramsey feels it’s completely acceptable — but only if you follow some basic spending advice.
Speaking to a caller who was wavering on spending $25,000 on a used car, Ramsey cut to the chase and told them simply to “buy the car,” per a YouTube clip of the show. His reason? Buying used, with cash — and staying away from unnecessarily high financing and lease payments — means you can use your income to build wealth.
The other options presented by the caller — to buy a cheap clunker or continue leasing — go against everything Americans should do with their money, Ramsey believes. Unless you’re a mechanic, going too thrifty usually results in spending more on maintenance and repairs in the long run. And leasing or financing something above your means is like throwing your money at car manufacturers and their loan departments.
“All of the millionaires that we interview did it (became millionaires) by saving and investing their income,” said Ramsey in a video posted on X on Sep. 12. “They don’t get screwed around and give their income to Lexus and Toyota and Ford and General Motors.”
“You need to decide how much you can actually pay for a car,” Ramsey said on his Ramsey Solutions site. “Going into debt to buy one is a horrible idea, so go ahead and take getting a car loan off the table. That means the car you can afford is the car you can pay cash for up front. Not only is it possible, it’s also the best way to buy a car, hands down!”
According to Ramsey and his co-host and wife, Sharon, the caller was having trouble switching gears from focusing on debt reduction to maintaining a more balanced financial lifestyle.
Strict Budgeting Is Important, But Exceptions Exist
After paying off $150,000 in debt, the caller’s thinking was still rooted in strict budgeting and putting everything toward their debt. An expense of $25,000, even one planned through saving cash, was scary to them. As one goes through different stages of wealth building, sometimes it takes a while for your emotions to catch up and your thinking to adjust from frantic saving to smart spending, as Ramsey explained to the caller.
What is important for Ramsey is to buy when you’re financially able — and while making an informed decision. Your financial goals should be to provide for yourself and your family, and to build wealth. That means you’ll still have to make some pretty big purchases occasionally.
“Remember, leasing or financing a car will not help you build wealth,” Ramsey wrote. “It’s much easier to save around $533 a month (the average car payment) for 10 months and buy a used car with no strings attached. Do you really want to sign up for a payment plan and pay thousands of extra dollars for several years? Of course, not — you’re smarter than that!”
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