How much does Dave Ramsey say you should spend on a car?
Asked by: Mr. Ross Rolfson | Last update: February 7, 2026Score: 4.3/5 (11 votes)
Dave Ramsey's advice is to buy a reliable used car with cash, keeping the total value of all your vehicles under half your annual income, and avoiding new cars unless you're a millionaire. He stresses paying cash to avoid debt, but if financing, aim for a short term, 20% down payment, and keep total car expenses (payment, insurance, gas) under 10% of your gross income (the 20/4/10 rule).
How much should I spend on a car according to Dave Ramsey?
Ramsey's car-buying rule is that you shouldn't buy a brand-new car unless you have a net worth of at least $1 million. Also, the total value of all your vehicles shouldn't be more than half your annual income. This is because you don't want too much of your money tied up in something that depreciates so fast.
What is Dave Ramsey's 25% rule?
The Ramsey 25% rule is a personal finance guideline by Dave Ramsey stating that your total monthly housing payment (mortgage principal, interest, taxes, insurance, HOA fees, and PMI) should not exceed 25% of your monthly take-home pay (after taxes). It aims to prevent people from becoming "house poor" by ensuring enough margin for other expenses, savings, and debt repayment, often combined with a 20% down payment recommendation to avoid Private Mortgage Insurance (PMI) on a 15-year fixed mortgage.
Why do Dave Ramsey and Suze Orman say you should avoid buying a new car?
Depreciation. Cars reportedly lose 20% of their value in the first year of ownership and retain just 40% of their original value after five years. Clearly, that is not a good investment. “Your goal should be to buy the least expensive car. Period,” said Orman. “That should steer you to a used car rather than a new car. ...
How much should I spend on a car if I make $100,000?
With a $100,000 salary, you can generally afford a car in the $30,000 to $60,000+ range, depending on your financial habits, but aim for total car expenses (payment, insurance, gas, maintenance) to be around 20% of your take-home pay, or roughly $800-$1,000 monthly, keeping payments to 10-15% ($800-$1,250) of take-home pay for a comfortable budget. A common guideline suggests total vehicle costs shouldn't exceed half your annual income, making a $35,000 car a starting point for some, while others might stretch to $60,000+ with good savings.
How Much Should We Spend on a Car?
How much should I spend on a car if I make $70,000?
With a $70,000 salary, you can likely afford a car in the $20,000 to $45,000 range, keeping your total monthly transportation (payment, insurance, gas, maintenance) to 10-20% of your take-home pay, or roughly $580 - $1,000 per month, depending on your other expenses, credit, and if you're buying new or used, with many experts suggesting a total purchase price of no more than 35-50% of your annual income.
What hidden car costs should I consider?
Beyond the monthly payment, you'll also face years of variable expenses like car insurance, gas, maintenance and taxes, which can spike without warning. By considering these costs before buying a new or used car, you'll be better prepared for the financial ups and downs of hidden car ownership costs.
What is Dave Ramsey's 8% rule?
Dave Ramsey's 8% rule suggests retirees can withdraw 8% of their starting retirement portfolio value annually (adjusted for inflation) by investing 100% in stocks, assuming a 12% average return to cover withdrawals and inflation, but it's highly controversial, differing sharply from the traditional 4% rule and exposing retirees to high risk from early market downturns (sequence of returns risk), though some argue it works with specific high-yield assets or if debt-free.
Why is Dave Ramsey against car payments?
“Cars, trucks, RVs, boats, and everything that has motors and wheels go down in value,” Ramsey wrote recently. “NEVER finance them, because they go down in value and you get stuck in them. Don't let debt trap you in something that's losing value every day. Save up, pay cash, and own it outright.”
What is the 50/30/20 rule for car payments?
The 50/30/20 rule suggests allocating 50% of your after-tax income to Needs (including rent, groceries, utilities, and essential transportation like a basic car payment), 30% to Wants (dining out, hobbies, travel), and 20% to Savings & Debt Repayment, meaning your car payment (plus other essentials) should fit within that 50% "Needs" bucket, ideally not taking up too much space so you can save and spend on wants too. A common guideline is to keep all transportation costs (payment, insurance, gas, maintenance) under 15-20% of your income, or even better, align with the stricter 20/4/10 rule for cars (20% down, 4-year loan, 10% total transport cost).
What salary to afford a $400,000 house?
To afford a $400,000 house, you generally need an annual income between $100,000 to $135,000, but this varies significantly with interest rates, down payment, and debt, with a common guideline being that your total housing payment (PITI) should be around 28% of your gross income, often requiring a salary in the low six figures. A higher income is needed with less down payment (like 5%) or higher interest rates, while lower income might work with a large down payment and minimal other debts, say $100k to $112k+.
What is the 80 20 rule Dave Ramsey?
Dave Ramsey's 80/20 rule in personal finance is that success is 80% behavior and only 20% head knowledge; knowing what to do (the 20%) isn't enough, you must have the discipline to do it (the 80%) through actions like living on less than you earn, avoiding debt, and budgeting, which is the real challenge for most people. It emphasizes that financial discipline and controlling your actions, rather than just understanding financial concepts, are the keys to building wealth and achieving financial peace.
What happens if I pay an extra $200 a month on my 15-year mortgage?
When you make an extra payment or a payment that's larger than the required payment, you can designate that the extra funds be applied to principal. Because interest is calculated against the principal balance, paying down the principal in less time on your mortgage reduces the interest you'll pay.
How much should I spend on a car if I make $60,000?
On a $60,000 salary, aim for total car expenses (payment, insurance, gas, maintenance) under $450-$600/month (10-15% of take-home pay) or a total purchase price around $20,000-$25,000 for a conservative approach, but consider a higher price (up to $40k) if you have a large down payment and strong budget, balancing this against savings and other financial goals.
What is the rule of 72 Dave Ramsey?
Dave Ramsey's Rule of 72 is a simple mental math shortcut to estimate how long it takes for an investment to double: divide 72 by the annual rate of return (as a whole number, e.g., 8 for 8%) to get the approximate number of years for your money to double. For example, at a 12% return (Ramsey's often-used figure), your money doubles in 6 years (72/12=6), while at 8%, it doubles in 9 years (72/8=9). It's a motivational tool to show the power of compound interest, though his use of an optimistic 12% average return is a point of debate.
What is the most financially smart way to buy a car?
The best way to finance a car involves getting preapproved from a bank or credit union before visiting the dealership to compare rates, making a significant down payment (15-20% is ideal), keeping loan terms shorter (around 48-60 months), and negotiating the total car price separately from the financing, allowing you to get a lower interest rate and save money long-term. Leasing or other options like PCP/HP exist, but a direct loan with good credit offers the most equity.
What is Dave Ramsey's car recommendation?
Dave Ramsey suggests other key tips for buying a car
On the vehicle's exterior, he recommends examining the paint, tire wear, lights, and doors for signs of damage or neglect. Inside, Ramsey recommends checking for wear on the seats, steering wheel, and pedals, along with making sure all doors lock properly.
Why does Suze Orman say never lease a car?
But according to personal finance expert and New York Times bestselling author Suze Orman, you should never lease one. “Leasing a car is the biggest waste of money out there. You only get to drive at 12,000 miles. You have to have a lease gap insurance.
Is Dave Ramsey a Trump supporter?
Ramsey supported Donald Trump in the 2024 United States presidential election.
Can I retire at 62 with $400,000 in 401k?
Yes, you can retire at 62 with $400,000 in a 401(k), but it's tight and highly depends on your spending, lifestyle, investment mix, and other income like Social Security; it might be sufficient for modest living with careful planning, but working a few more years or drastically cutting expenses offers more security, with a financial advisor being key for success.
What are the 4 funds Dave Ramsey recommends?
And to go one step further, we recommend dividing your mutual fund investments equally between four types of funds: growth and income, growth, aggressive growth, and international.
How long will $500,000 last using the 4% rule?
Your $500,000 can give you about $20,000 each year using the 4% rule, and it could last over 30 years. The Bureau of Labor Statistics shows retirees spend around $54,000 yearly. Smart investments can make your savings last longer.
How do you know if a dealer is ripping you off?
You know a car dealer is ripping you off through ** high-pressure tactics**, hidden fees, unnecessary add-ons (like fabric protection, VIN etching, rustproofing), low trade-in offers, confusing pricing, or backdated contracts; look for transparency, demand itemized breakdowns, research fair market prices, get a pre-purchase inspection, and always get everything in writing to avoid scams like "yo-yo" financing or bait-and-switch tactics.
How much is $40,000 car payment for 60 months?
A $40,000 car payment over 60 months results in monthly payments typically ranging from about $700 to over $900, heavily depending on your interest rate (APR); for example, at 7% APR it's around $800/month, while lower rates (like 2.9%) could mean about $750/month, with higher rates pushing it towards $900 or more, plus thousands in total interest paid over the loan term.