Dave Ramsey has done the math on new car loans. If you have a 30 year old couple, and like many couples do, every three years they both buy new cars. If that is a $35K car, there will be about $5,000 depreciation for each car, every year.
That is ten thousand a year in depreciation plus maybe $300 a month in interest.
Also, save up the money and pay cash and there is no interest.
So Dave will point me to these three year old Toyota Tundras, Tacomas, Sequoias, Highlanders, 4Runners etc... that I can pick up for $15k under new?
What interest rate am I sitting at on a $35000 vehicle that I'm paying $300 in interest each month?
If I save to put cash on a car at $XXX a month there is little difference that me having the vehicle and handing the bank $XXX a month at 0-2 (which is a pittance), no?
Dave Ramsey is great if you are a product of the depression or are not disciplined enough to keep your head above water - you know, the kind of people that put vacay on a credit card and let her ride at 27%.
Dave, and I, didn't say you would buy a 3 year old vehicle. You mis read my post. You get one older than that. My Nissan Frontier was 8 years old, always garaged with 42K miles on it, and I paid $15 grand for it. This is a 4WD vehicle that costs $32 grand new.
I have had the Nissan for 2 1/2 years and it is a great vehicle. Still looks like
I said you would pay $300 a month interest on TWO new vehicles, not one. Once again, you misread my post. Actually that number is low in my experience, in fact the last time I had a car loan the interest rate was 10 percent, so the interest on two new cars would be about double that.
Dave's advice is unassailable if you will closely read the numbers that Dave puts up, and not make up your own numbers in a misguided attempt to show that Dave is wrong. In fact, the interest costs even at 10 percent are insignificant compared to depreciation.
Dave is correct that, if you buy a new car every 3 years on a note it will cost you a million bucks by the time you are 60.
And he is also right that you can't afford a new car unless you have a net worth of a million dollars. The only way around that, and I know several people who are doing it, is to buy an expensive new vehicle, and drive it until the wheels fall off. Keep the new car for 16 years and it will work out well for you.
You say that you can get a car note for 2 percent. Well, they used to be 10 and 12 percent, and interest rates will be back up high again by and by. These things run in cycles.
