Do you think financial advisors like Dave Ramsey..etc give people good or bad car buying advice on car buying? (car loan, insurance)
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Ive heard Dave Ramsey and many similar financial advisors comment on how car payments are a waste, and if you have to make payments, you cant afford the car, so you should save up and buy cars cash. Then they will usually quote the average payment is $450-650 a month for 6-7yrs at average 8-10% interest. Im not sure how many Americans are actually buying $30-50K cars where they have to make 6-8 year payments at such high and almost insane interest rates.
Then the next advice that is given is for people to buy a $1500-$3000 car and then save the $4-600 a month on car payments to buy the next car cash, while pretty much neglecting the topic of upkeep on old beaters. As per many threads in this forum, we can all agree that a $1500-$3000 car will most of the time need $1000-3000 of work to be in top shape, reliable , and give you a piece of mind that it will start and not leave you stranded, unless you are a DIY person or got a previously owned well maintained car.
Many of my friends are now buying into this car advice, so my questions are:
Are they getting good advise or setting them up for trouble?
Do you consider car payments a waste or bad debt?
Should you buy a car cash only?
If you cant afford to buy a car cash, do you consider it that you cant afford the car and living above your means?
For people that take his/her advice, if your car broke down and you need a car ASAP, what other options do you have other than car payments if you dont have $3000, $5000, $10K set aside for a car?
Would you trade in your current car for a 10-15yrs old $1500 car, just so you dont have car payments aka debt?
Yes, in general, Dave Ramsey is correct.
Dave Ramsey does have his critics.
Most/many people who purchase a new car don't have a clue how much they are actually paying if a loan is involved. Most/many do not READ the documents needed to finance a new car. And if they do READ the documents many don't understand them.
Find out what the total cost of the new car is with interest. Get the full final amount.
In many cases just the interest alone you can purchase a good older used car - and have NO payments.
Then you can save cash money for that new car later.
The new car dealers and banks make it too easy for someone to buy a new car.
The lease.
Had a neighbor trade in his owned car for a new one. Instead of buying a new car he got a 3 year lease.
The new car salesperson advised that this was much cheaper. But had a difficult time keeping miles under the annual limit. Bought a used motorcycle for warm weather to keep miles down on new leased car. Had one accident in motorcycle.
So then near the end of the 3 year lease - goes to trade in. Has no money. Has no equity in leased car.
So ends up with a new Nissan Versa with 84 month payments.
So do the math. Neighbor drives somewhere around 15,000 miles per year. What will the miles on odometer be after 84 months?
I think that Dave Ramsey's advice is good for people who are totally incompetent at managing finances and have dug themselves into a deep hole of bad credit and poor decisions.
If you are at all financially capable, then his advice is terrible. For instance, when you say "the average payment is $450-650 a month for 6-7yrs at average 8-10% interest" I can't believe anyone would be that incredibly stupid.
Dave Ramsey's problem is his advice has to be targeted to total morons and financial nitwits, and he has to make sweeping blanket statements, which aren't fully and totally applicable.
I think that Dave Ramsey's advice is good for people who are totally incompetent at managing finances and have dug themselves into a deep hole of bad credit and poor decisions.
If you are at all financially capable, then his advice is terrible. For instance, when you say "the average payment is $450-650 a month for 6-7yrs at average 8-10% interest" I can't believe anyone would be that incredibly stupid.
Dave Ramsey's problem is his advice has to be targeted to total morons and financial nitwits, and he has to make sweeping blanket statements, which aren't fully and totally applicable.
Yeah I agree he can help completely clueless people, but I cringe when I hear some women say after listening to him, now Im going to go buy a $2000 car so I dont have payments...whats the matter, do you think its really that hard to find a reliable $2000 car.
For me there is no way I would pay $10K or $20K for a used car vs just finance one with a very low interest rate. I feel more at east with a $200 car payment and $8K set aside incase I need it for other things or major repair vs having a paid off car and if anything happens you now have to come up with $2-3000 for a repair.
Ive have tried to explain to many people that listen to him, if you buy a $1500-3000K beater car, it can easily cost you 1-2 yrs of car payments if you have a transmission failure or major engine problems.
I think he gets paid millions of dollars to dole out kosher sounding advice that's not grounded in reality.
I mean how many of his listeners could afford to pay cash for a house?
I think his target audience is people who coasted along, ended up with a lot of credit card debt, and are now trying to figure out how to dig themselves out of the hole. Being Christian probably helps too.
I like him and I enjoy listening to his program but I do not agree with everything that he says.
Yeah, it seems like he can over exaggerate his numbers to make his points. I think he has probably helped many, but doesnt live in reality that many dont have $5-10K just siting around for car purchases.
Location: Stuck on the East Coast, hoping to head West
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I'll preface that by saying that I don't follow Dave Ramsey and I think he's an idiot who engages in overly simplistic and, I'd argue, fuzzy math. He was bankrupt and then parlayed that into selling his bad advice. It's like an alcoholic who, simply because they can't handle a drink, tells everybody else they shouldn't drink, either.
Anyway.......
I think a new car can be a great deal if you keep it after paying it off. I have bought cars new and, by taking care of them, have had them last for at least 10 years. If you divide my total cost by years of ownership or even miles, I'm getting an outstanding deal.
The car payment is one of relevance. If you can afford the payment, then I don't see a problem with it. I have also found new cars not necessarily more expensive to insure than older ones. In one case, my new car was cheaper to insure than one of my old ones.
If you pay cash for a new car, then you can't invest that cash. That's worth considering.
I have also bought used cars. I do this if I don't have a steady income stream (I sometimes take a break from corporate and do lots of freelance work). I pay between $5,000-10,000 for used cars and that gets me amazing cars.
I think people get into trouble with new cars when they have 2 car payments (I'm thinking husband & wife) because it's just really hard to have a cashflow that covers housing/utilities/insurance, etc AND 2 car payments.
I think it's a horrible idea to roll over car loans. Kinda reminds me of those payday loans that you can really pay off.
As far as leasing goes, it doesn't work for my life; but, I have a friend for whom it does work out so never say never.
the answer for most of us is to find a LOW monthly payment, with low miles, on something that will be ultra reliable. So we don't spend the extra money at dealerships. Most of the cars that fit this profile probably aren't very secksy, or anything you'd want. entry level nissan, honda fit, chevy spark, etc. You just don't really want those cars, but they will be reliable, won't cost a lot to finance, and won't just kill you in insurance costs. THEN, get all of your other finances in order, with the money you aren't spending on automotive.
When you've done that, keep driving it until you've saved to buy something you WOULD want, that is also reliable, and easy to afford without a payment.
That's years and years for most of us. And miles and miles. And repairs and repairs. It's a no win, especially, if you're like I am, and haven't had a wage increase since 2001.
Not inflation adjustedl; ZERO wage increase. And many years making less. FML.
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