Dave Ramsey's "Never Make a car payment again"

[911fever]

http://www.daveramsey.com/media/flash/elearning/drive-free/player.html


I'm in the car industry and this scares me haha.
Very thought provoking!

[ExtraSlow]

I can't find it, but I'm sure this is a repost.

Lots of people do this already, myself included. Then there are people who won't understand the math in that video, and will continue to bu brand new cars for their whole life because they thing it works out cheaper.

Really, from a purely economic standpoint, the truly shitty cars pay off 99 times out of 100.

[TomcoPDR]

It's a repost.

From discussion of the original post, the points were made that new vehicle gives you warranty, maintenance free, and what if the buyer was in real estate where they too look good.

And it doesn't account for people who lease (i.e. real estate agents), who can use it as a business write-off, but able to be driving a brand new, worry free vehicle.

In his theory, he didn't account for HIS formula that his vehicle would depriecate neither. A beater for $6250 will not still be worth $6250 in 1 year. What about being stuck with a lemon.

[CUG]

Originally posted by TomcoPDR
It's a repost.

From discussion of the original post, the points were made that new vehicle gives you warranty, maintenance free, and what if the buyer was in real estate where they too look good.

And it doesn't account for people who lease (i.e. real estate agents), who can use it as a business write-off, but able to be driving a brand new, worry free vehicle.

In his theory, he didn't account for HIS formula that his vehicle would depriecate neither. A beater for $6250 will not still be worth $6250 in 1 year. What about being stuck with a lemon.

I don't know, those are minor details. If I was buying new cars every few years, I wouldn't want to look like a fool either.

If it's a business, it's a different story. Also, not every agent needs a 100k benz to look good. As long as their vehicle looks good, is clean and rust free, their respectable.

[Canmorite]

12% a year indefinitely...:rofl:

[Sugarphreak]

...

[911fever]

Originally posted by Sugarphreak
"A great 11,000$ car" :rofl:

He makes this great 11,000$ sound so great... also as you move up he never subtracts how much money you lose on your old car only that "You can get pretty much what you paid for it"...

Once upon a time when I had an 11,000$ car I sold it 4 years later for 5500$... barely, lol.

"Just think, your 20,000$ is sitting there earning about 12% in a mutual fund"

Yeah... until a recession comes along every 6 years or so and knocks it down to 10,000$ :rofl:

no kidding, he exaggerates his money so well.
In my experience, cars under 20k, especially the 20k to 10k mark depreciate faster than cars under 8-10k, so buying an 11k car would mean it would definitely lose. And he left no room at all for a recession

[ekguy]

if you loosely followed that you could still end up with a nice nest egg. I'm sure it's not as cut and dry as he makes it out to be, but I definitely see some merit in his way of thinking.

[bspot]

Just because it needs to be said again, 12% per year as the stock market average :rofl:

[benyl]

He forgot to say that I would rather enjoy a nice new car at 30 than drive a ferrari once a year at 70 with hand controls cause I am so old.

[max_boost]

Originally posted by bspot
Just because it needs to be said again, 12% per year as the stock market average :rofl: :rofl:

[403Gemini]

I think the biggest hurdle, especially for guys, is getting over "car fever" , and by that I mean getting tired of your ride. most guys drive their cars for about 6 months before thinking about getting a new car... once I pay off my WRX I plan on keeping it for quite along time... sure I eyeball other cars ALL the time, but I don't need another car anytime soon.

[BigMass]

lmao at that video. This Dave Ramsay guy has probably never owned a used car in his life if he's comparing the ownership costs to a new car. Oh and used cars don't depreciate lol ok there buddy. If his new car is depreciating %70 in 4 years he needs to stop buying domestics. %12/year in the stock market? This guy must have been full bore during the realestate boom telling people house prices only go up. Great advice there buddy. It's like going back to grade 7 where they told everyone that your investments should double every 7 years and by the time you retire everyone will be a trillionaire. His show on Fox is for people that are dumber than a sack of bricks. "Hey, if you take that %20 interest you're paying on your credit card and roll it over into a cheaper bank loan you'll save money". Thanks for that awesome advice professor. I wish i could be a millionaire pundit on TV giving people common sense advice i figured out myself when i was 12 years old.

[Tik-Tok]

Originally posted by ExtraSlow

Really, from a purely economic standpoint, the truly shitty cars pay off 99 times out of 100.

This much is true. If you do just drive shitty cars, and be sure to invest that $475/month, then you'll definitely be on top at the end of your working life. However as mentioned by everyone else, the math he's doing just isn't realistic.

[Rat Fink]

.

[jake1er]

this definitely works. I hate taking out loans, and will never take one out til i take out a mortage.

in 3 years i went from driving a 1000$ 1991 integra to a 1994 stealth i bought for 10000$... every car i bought i never lost more than 2000$ on. Right now i got another couple thousand banked for my next upgrade.

i have tons of friends who went out and bought 10-15g cars as soon as they got real jobs, they are just paying off those cars 3 years later, while I owned my car of the same value a year earier by saving my cash and putting it all down upfront.

[frozenrice]

I have three early 90s cars all paid for. The extra money not spent on car payments goes to my mortgage. And any repairs that I need, I do myself saving even more so that i can buy upgraded parts or whatever.

[Aleks]

If I still lived at home and never went anywhere and never got married and never had a child or bought a house, and took the bus everywhere I'd be retired right now :banghead: :banghead:

[benyl]

Originally posted by Aleks
If I still lived at home and never went anywhere and never got married and never had a child or bought a house, and took the bus everywhere I'd be retired right now :banghead: :banghead:

Hey me too! Except for the kid part.

[max_boost]

If I was never into cars I wonder what else I would have spent it on. From now on I've reduced my car related expenses to under $1000/month lol lease payment, insurance, maintenance and gas must fall under that amount. I can no longer keep up with the Beyond ballers lol

[Godfuader]

Originally posted by BigMass
Oh and used cars don't depreciate lol ok there buddy. If his new car is depreciating %70 in 4 years he needs to stop buying domestics. %12/year in the stock market?
:rofl: I lol'd when he said 70% depreciation. The car I have now is 6years old and autotrader.com has over 50 similar mileage cars with only 35% (avg) depreciation. His 12% lifetime interest was a joke. I will happily give him $50k for a 10% perpetual return, he can keep 2% as fees.

[calgary350z]

New cars every year or two is fun though and i know its not smart but it is my one thing in life that I dont mind spending money on.
I dont smoke, drink or do drugs so I figure I make up a bit of that money I lose on my bad car habit.

My car only has 8500km on it and I just sold it....let the cycle continue:thumbsup:

[TorqueDog]

It's not a bad idea, but the mathematics are best possible scenario, and his interest/depreciation rates are way off.

Giving up buying cars to a car guy is like a smoker giving up... well, smoking. Unless it's causing me any grief, I won't be inclined to change. And since sports cars give me a big stupid grin that makes me feel like I'm a kid again, I see no grief being caused.

Although it is a good idea to pay yourself first, then allocate money to bills. If you plan your finances like that, you'll always be ahead.

[911fever]

Originally posted by TorqueDog

Although it is a good idea to pay yourself first, then allocate money to bills. If you plan your finances like that, you'll always be ahead.

Quality advice

[ReasonOne]

The theory is very sound, but the rates and ratios mentioned are out to lunch for Joe Average, as many people here have already stated. It's sensible enough to assume that one who is financially savvy enough to earn 12% or better in this economy would probably also be savvy enough to find a way to claim/write off their transportation and any other associated costs relating to what they drive. So would it matter if you were paying $3000/month on a Bentley that's a valid and deductible tax expense in your line of business? It's a no-brainer.

I've been doing this for years. One thing he neglects to mention is the repairs/maintenance involved with older vehicles. If you are mechanically inclined and capable of performing repairs yourself - no problem! But if you need to take your car to somebody every time something breaks down, you would SERIOUSLY need to rethink this strategy. Unless - once again, said maintenance/repairs are tax-deductible.

My father did very well running his own classic car dealer/brokerage. He knew the vehicles, he knew their value, he knew how to fix them and he knew how and where to get ahold of hard to find parts.

I love older cars. I tend to buy them up when the majority of the depreciation is already worked out of them. I'll even have the odd one restored and resold for a fair profit. But you can't do it because you want to be rich - the majority of these people go broke in the first year or two. You have to do it because you love it.

Ultimately - if you are wealthy enough to buy a new car every couple years and still set aside a few grand a year in savings or towards retirement, you wouldn't really need to worry about this in the first place. Just buy what fits your budget and meets your needs.

Just my two cents.

[88jbody]

Great idea...but I have never made a car payment yet...so I guess I can't be rich and drive free cars.

[Xtrema]

Car will always be a luxury. If you want to save $, take public transit and take a cab on the weekend and rent a car if you need to get out of town. You will still be WAY ahead than car ownership.

For example:

Transit pass for 2: $180
Car rental for weekends: $400 ($40 x 8 days + gas)

That's $580 a month in transportation expenses.


Car ownership:

Car payment: $400
Insurance: $80
Gas: $200
Registration: $6
Spouse bus pass: $90

$776.


That's almost a $200/month saving.

[911fever]

Originally posted by Xtrema
Car will always be a luxury. If you want to save $, take public transit and take a cab on the weekend and rent a car if you need to get out of town. You will still be WAY ahead than car ownership.

For example:

Transit pass for 2: $180
Car rental for weekends: $400 ($40 x 8 days + gas)

That's $580 a month in transportation expenses.


Car ownership:

Car payment: $400
Insurance: $80
Gas: $200
Registration: $6
Spouse bus pass: $90

$776.


That's almost a $200/month saving.

It's even worse here in Ontario!


For example:

Transit pass for 1, for a month: $475
(student), $602.00 (adult) on the GO Train
Car rental for weekends: $425 ($40 x 8 days + gas)

That's a minimum of $900 a month in transportation expenses.


Car ownership:

Car payment: $400
Insurance: $300
Gas: $250
Registration: $6
Spouse bus pass: $150

$1106.

[Tik-Tok]

Originally posted by Xtrema
Car will always be a luxury. If you want to save $, take public transit and take a cab on the weekend and rent a car if you need to get out of town. You will still be WAY ahead than car ownership.

That's almost a $200/month saving.

Or in reality...

Transit pass: $90
Car rental for weekends: $400 ($40 x 8 days + gas)

That's $490 a month in transportation expenses.

Car ownership:
Car payment: $250 (financing a 2010 Kia Rio, just for example)
Insurance: $100
Gas: $100
Registration: $6


$456


It's actually cheaper to own an inexpensive car, rather than take transit (assuming you don't have to pay for parking at work)