Renowned financial advisor Dave Ramsey has offered valuable advice to Americans considering buying a new car, highlighting the importance of making a well-informed and financially sound decision.
What Happened: Ramsey advises against the pursuit of the perfect car, instead urging buyers to focus on practical needs and financial constraints, reports The Street.
He also suggests that buyers ask themselves essential questions such as the type of vehicle needed for daily routines, the number of passengers typically carried, and the importance of fuel economy and storage capacity.
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He also encourages buyers to be patient and explore various options, both online and in showrooms, before making a decision. Ramsey warns against the rapid acceptance of the first appealing offer, emphasizing the importance of finding the best fit for individual needs.
However, Ramsey also offers a sobering reminder about the steep depreciation of new cars, warning that unless your net worth exceeds $1 million, opting for a used vehicle is the wiser financial move.
“Brand-new cars drop in value like a bag of rocks, losing 60% of their value in the first five years,” he said in a post last year.
The financial guru also recommends that buyers narrow their options to a handful of vehicles that align with both their budget and daily needs.
He asked people to assess key factors like safety ratings, acceleration, fuel efficiency, and overall comfort, urging shoppers to prioritize practicality over simply choosing the cheapest option.
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Why It Matters: The advice from Ramsey comes at a time when the cost of car ownership is a significant concern for many Americans.
A January 2025 report from Edmunds reveals a troubling trend in auto financing. In the fourth quarter of 2024, about 24.9% of trade-ins used for new car purchases involved negative equity, up from 20.4% during the same period in 2023.
The average amount borrowers owed beyond their vehicle’s value hit a record high of $6,838, exceeding the previous record of $6,458 set just a quarter earlier. Alarmingly, nearly a quarter (24.6%) of those with negative equity were more than $10,000 underwater on their auto loans.
Ramsey’s advice also aligns with his previous stance on car payments, where he advocated for avoiding the middle-class trap of perpetual car payments, stressing the importance of making financially prudent decisions when it comes to car ownership.
Meanwhile, legendary investor Warren Buffett once opted to wait on buying a new car for years. The Oracle of Omaha drove his 2006 Cadillac DTS for eight years before finally upgrading — but only after General Motors CEO Mary Barra personally convinced him.
After hearing about dozens of improvements during a brief conversation, Buffett agreed to trade it in for a 2014 Cadillac XTS.
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This article Dave Ramsey Says Don’t Buy A New Car Unless You’re Worth $1 Million originally appeared on Benzinga.com
