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Advice, like a pair of Jeans, is rarely one size fits all. Consider three different people, all considering borrowing $30K to by a $35K BMW 3 Series.
Buyer 1 has shoddy credit. His income is $42K/year, and with the down payment from his tax return, he is going to borrow money t 14%. To keep his payment reasonable, he'll do it on an 84 month note, signing up for a $565/month payment.
Buyer 2 has good credit, and makes $70K a year, and is going borrow at a 4% rate, on a 6 year term. His payment will be in the $470 range.
Buyer 3 makes $120K/year. He is going to get a 1.9% rate, at 5 years, and pay $525/month.
Buyer one should listen to the DR show, his podcast, read his books, sleep on them to learn by osmosis, and maybe take a class. He is about to make a phenominally dumb decision. Taking that tax return to buy a beater car while he gets his house in order is the best thing he could do.
Buyer two should consider DR's advice. He is likely getting too much car, and will find the payment takes a chunk out of his income/lifestyle. But, he isn't trying to swim with a cinder block.
Buyer 3 can do whatever he wants. The car is a small part of his world. He wouldn't be remiss in following DR's advice, it likely wouldn't hurt him, but one way or another, the impact won't be as heavily felt.
I think Dave R.s advice is in general pretty good. Do American's get too much in debt? Absolutely, so Dave discourages debt. I agree. I bought a truck this year, but I took payments. However, I paid it off in 6 months. My son does the same as me. He wanted a minivan for his growing family. He paid cash for a 2014 Kia rather than the $20,000 plus Toyota with all the electronic do dads. Smart man.
He reminds me of Mitt Romney telling all the poor people to get off welfare & food stamps and go get 2-3 jobs. Meanwhile Mitt made his fortune abusing the corporate welfare system, costing tax payers billions of dollars.
He reminds me of Mitt Romney telling all the poor people to get off welfare & food stamps and go get 2-3 jobs. Meanwhile Mitt made his fortune abusing the corporate welfare system, costing tax payers billions of dollars.
Can't say I disagree with you. Crazy thing is, where I live, many people are staunch republicans. Simply because of the perceived "conservative" lean that R's have. They have no other similarities though, as many Alabamians are lower income, live in rural areas, and never benefit from a reduction in social services.
Back to Dave Ramsay....It's GENERALLY good advice to avoid debt. Duh. Your granddad told you that. Your dad told you that. But it's not realistic for most of our lives, unless you are childless, and well off in your income stream. Modest living on a low income won't get it done.
Not a fan of Dave, though I can see that he gives "hope" to less savvy, financially illiterate people. He makes it seem like anyone can pay off their debt, and soon, they'll be able to afford whatever they want, if they just have some patience. His advice is almost never geared towards people who are already on sound financial footing.
As far as the whole "buy vs lease" argument, that's been hashed out a million times on this forum. I'll maintain however, that I view leasing a car the same way I do renting an apartment... Your money is not being used to benefit YOU, you're making someone else rich over time.
Of all my friends, the ones who lease their cars are generally the least well off financially of the group. They never build any equity in their vehicles, that money is simply gone at the end of the lease period. They're also consistently taking the depreciation hit on multiple new vehicles with each new lease term, while someone who buys only does so once.
The key to building wealth is to make your money work for you as much as possible, and as cars are a depreciating asset for the most part, the only way to come out ahead in the long term is to buy, not lease, and at least have some equity in your purchase.
Dave Ramsey's advice is generalized. Look at your specific need and financial situation when you are planning to buy a vehicle.
Driving 5 miles to a park and ride and taking public transportation is different from driving 20 miles to work with $2 toll on highway.
Someone I know bought a brand new civic in 2000 and he still drives it. He paid off the car in five years and for the last 10 years no car payments.
I don't listen to Dave Ramsey's show not have I read his books, but am familiar with his advice. I agree it's not for everyone, and is aimed primarily at those who have financed a lifestyle above their means or are having trouble making ends meet. If he is really advocating everyone go out and buy a $1500-$3000 car in cash, I agree that doesn't buy much, and such a car is likely to need expensive repairs or replacement in the near future.
Used cars are typically a better deal than new cars, but low mileage, well maintained used cars don't go for that much less than a comparable new car. My husband and I have bought four cars, three of them brand new. When we bought the first two, we wanted something reliable but didn't desire anything more than a base model. We found a base model brand new car would cost about the same as a used car of the same model about 2 years old with 30k or fewer miles. These used cars were usually feature loaded higher trim models, so commanded a more premium price, and we decided we'd rather have the extra miles/warranty than the extra features.
Also, a car, much like a house or child care, is one of those things where my goal is not to get by as cheaply as possible. My weakness when car shopping is safety. I have young children, and can't ignore the fact that motor vehicle crashes are one of the leading causes of death for children. Newer cars have better safety features and are better engineered to protect occupants in a crash, so I will probably always opt to buy a new (or fairly new used) vehicle as our primary family car.
The core value upon which Ramsey's advice is based is to live within your means. You can do this without following all his specific recommendations. We were able to easily afford all three new cars we bought, and the last two were paid off in less than a year. For our most recent new vehicle, we paid cash for half of it and financed the other half at a very low interest rate, with no prepayment penalty. I thought about waiting to buy the car until we had saved up all cash for it, but did the math and realized we'd end up paying less than $200 interest to buy it right away, finance the portion for which we didn't have the cash, and pay off the loan as quickly as possible. Also, at the time we bought the vehicle, we were in a better spot to sell our old vehicle ourselves, which netted us more than $200 profit over doing a trade in.
DR is also very much against using credit cards. I've charged everything to cards since I was in college, and have never paid a dime in interest. I actually find it much easier to categorize purchases and be aware of how much we are spending when we charge things to a card vs. always paying cash, as he recommends. In the process, we've also reaped thousands of dollars in credit card rewards by buying the things we would buy anyway, which is a nice perk of cards.
He reminds me of Mitt Romney telling all the poor people to get off welfare & food stamps and go get 2-3 jobs. Meanwhile Mitt made his fortune abusing the corporate welfare system, costing tax payers billions of dollars.
Why don't you tell us about one of those things that you allude to, and then tell us how much it cost you.
To everyone talking about financing a depreciating asset - that's what leasing is for.
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