Dave Ramsey: don't buy new car without $1 million net worth (accounts, dollars)

[rstevens62]

Originally Posted by thecoalman

That's what I was finding for the type of vehicles they were interested in. Financially it may have been a better deal but only by a little bit. It came no where near offsetting the risk of not knowing the history of the car, e.g. was some teenager driving it who was mashing on the gas constantly.

So I guess cars loosing a large part of their value when they leave the lot is not accurate today, or..?

[Serious Conversation]

Dave is good for credit card debt reduction. Outside of that, most of his advice is not very good.

[unit731]

Originally Posted by chet everett

Pure and simple DR is full of crap -- he cultivates absolute fealty among his listeners so that they can be funneled into the waiting arms of his "referal network" of fee based advisors that will then fleece idiots with high priced /low return "investments"...

Sick and disgusting.

Complete opposite here. Not sure if poster has ever listened to Dave Ramsey on radio.

I listened many times when he was on XM Radio.

All good advice. And quite entertaining.

[craigiri]

Originally Posted by k374

wow, this guy is supposed to give savvy financial advice but what percentile of net worth do you have to be to have $1 million net worth? This would mean only a fraction of the population would buy new cars and the entire auto industry would bust.

So, what is your income criteria for car affordability? Don't buy a car more than 30% of your annual income is a good test in my view.

Firstly, the auto industry will go through a MAJOR change from now on, due to ride sharing and self-driving cars. We already went from people buying new cars in 2-4 years to now buying them every 8-10+ years, so it's not like the industry hasn't already seen "bust". They certainly have....just take a ride through Michigan.

Secondly, the very idea of using resources, energy and the accompanying pollution....just to "keep car plants from going bust" is not something any real financial genius would approve of. This is akin to saying that we should remove most robots from car plants because "all the workers have gone bust" (true...they have!).

Lastly, the idea of having a lot of money before one would buy a 30K+ new car seems like a good one. Obviously there are some exceptions...a work truck, for example, if used regularly can be a "tool". Also, many cars are as low as 15K...and, obviously, this does not make the same dent as a 45K model.

For many people, having a new car is a "ego" proposition. Keep up with the Joneses. Or, they KNOW they are going to be poor their entire lives so they borrow and borrow, figuring they will always be borrowing.

Personally, we have always used the "easy to buy using cash" measurement. We would never buy a new car (or any car, for that matter) that we could not buy with cash - AND, that the loss of that cash would have to not make a real dent in our overall savings or net worth.

Using this as a rough calculation (say, spend 10% of available cash)....one would need to first have:
1. A house or place to live which is sustainable and at least partially paid off - the rent or mortgage would have to be small relative to income.
2. A retirement account of some sort (IRA, etc.) which was funded monthly and yearly.
3. 300K in additional cash in liquid form
4. Whatever other savings or investments that one might have.

So figuring a homeowner has
200K in value (after mortgage) in their home.
150K in IRA (younger or middle aged person)
50K in the bank
250 K in bonds and stocks
-----------
That would mean about 650K in net worth might allow them to conservatively buy a 30K car.

In any case, the real lesson here is that if you don't have a pot to **** in, definitely don't buy a new car.

[Tominftl]

Originally Posted by NoMoreSnowForMe

I love the part where he says that people say to him that they're afraid of buying a used car. Then he says to them, what are you driving now? A used car. LOL.

At least the car I bought new wasn’t in a flood or had some defect the previous owners couldn’t deal with. Beware of buying used unless you can confirm it hasn’t had issues. CarFax is your friend. Make use of it.

[craigiri]

Originally Posted by rstevens62

So I guess cars loosing a large part of their value when they leave the lot is not accurate today, or..?

True. It's not like it used to be because vehicles last much longer and retain value.

You don't save as much as before on the low mileage cars. In fact, I'll be the first one to say that low priced new cars (or close to new) are often the best long term deals.

On the other hand, my son had someone smack his honda and with the proceeds bought a Toyota hatchback with 95K on it. I thought he was being foolish (too cheap, since the Honda had low mileage). Well...I just visited him and that Toyota is near 200K miles and he hasn't had any major problems. So he got "new car mileage" out of a (very) used car.

[Checkered24]

When dive into depreciation, what "new car" is bought has a huge affect on it's depreciation too. Particularly if your not going to "drive it into the ground."


A sedan that is worth +/- 30% of it's original MSRP in 60 months suffers far more depreciation than some SUV's and trucks that are worth +/- 55% after 60 months. On a $40K vehicle, deciding between the sedan and SUV alone can be a $10K swing in "cost" just from the depreciation (for those who routinely replace their vehicles).


On the flip side, that sedan worth 30% of it's new price at 5 years is one heck of a deal on the used market, costing less in total than the initial depreciation on most new vehicles!

[unit731]

Originally Posted by craigiri

So figuring a homeowner has
200K in value (after mortgage) in their home.
150K in IRA (younger or middle aged person)
50K in the bank
250 K in bonds and stocks
-----------
That would mean about 650K in net worth might allow them to conservatively buy a 30K car.

In any case, the real lesson here is that if you don't have a pot to **** in, definitely don't buy a new car.

Sorry. A tad OFF. Can't really count the home.

Best advice here is for all to view the entire video: The Retirement Gamble. Frontline.

LINK

Better get more information on that IRA or 401K.

Sadly, probably few or none will actually spend the time to view the entire video.

[silverkris]

Originally Posted by chet everett

Pure and simple DR is full of crap -- he cultivates absolute fealty among his listeners so that they can be funneled into the waiting arms of his "referal network" of fee based advisors that will then fleece idiots with high priced /low return "investments"...

Sick and disgusting.

I'll concur that his network of ELPs (endorsed local providers) aren't always the best solution - their suggested investment vehicles often carry large fees and loads.

However, for folks who are trying to get out of debt and put their financial house in order, Ramsey can make sense. But once they're on sound ground, they may want to find others for better investment advice.

[stan4]

My 1 year old car may have technically depreciated Blahblah% in the 12 months I've owned it, but there is no way I could find and buy an equivalent car for the same price (Blahblah% off MSRP).

It's a false equivalency.