Dave Ramsey Says This Everyday Payment Could Drain Your Future Wealth

Financial commentator Dave Ramsey says there is one type of monthly payment that can quietly cost Americans millions of dollars over their lifetimes, even if they do not realize it.

In a video posted to X, Ramsey said the average car payment in America is $500 per month. He argued that if someone invested that same $500 every month from age 30 through 70, they could end up with $5 million by retirement.

“And you scratch your head and wonder why you’re freakin’ broke!” Ramsey said.

Recent LendingTree data puts the monthly cost even higher, showing that the average car payment is $617 to lease a new car, $765 to finance a new car and $542 to finance a used car, which would make Ramsey’s retirement-savings estimate even larger.

Ramsey’s point is that making car payments for the long haul does not build wealth. Because a car payment is debt, he says, it keeps people in the red instead of helping them move forward financially.

Personal finance expert and Ramsey Solutions personality George Kamel agreed. In a Facebook post, he wrote:

“After 60 months of payments, you’ve got a paid off car that you bought for $40,000, that ended up costing you $50,000 (thanks to interest), that’s now only worth $16,000 (thanks to depreciation).” He added that car payments can make people look wealthy while remaining broke.

Ramsey Solutions also shared several ways to avoid ongoing car payments.

Ways To Avoid Regular Car Payments

Buy a Used Car

Used cars are generally less expensive and can be just as dependable. The advice is to keep the vehicle for the long term. New cars are suggested only for those whose net worth is above $1 million.

Pay Cash

Rather than borrowing money for a vehicle, Ramsey recommends paying in cash. Loans add interest, so the better approach is to determine what you can truly afford. As Ramsey put it, “The car you can afford is the car you can pay cash for up front.”

Save Up

If you do not have enough money to buy a car outright, the recommendation is to wait. Cut expenses, save more, and purchase the car later.

Caveat

Ashley Morgan, an attorney and owner at Ashley F. Morgan Law, PC, said leasing can still make sense in some cases, despite Ramsey’s broad advice. She noted that it may work for people who drive relatively few miles, want predictable costs, plan to change vehicles often, or move frequently.