Do you think financial advisors like Dave Ramsey..etc give people good or bad car buying advice on car buying? (gas, repair)
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Ive heard Dave Ramsey and many similar financial advisors comment on how car payments are a waste, and if you have to make payments, you cant afford the car, so you should save up and buy cars cash. Then they will usually quote the average payment is $450-650 a month for 6-7yrs at average 8-10% interest. Im not sure how many Americans are actually buying $30-50K cars where they have to make 6-8 year payments at such high and almost insane interest rates.
Then the next advice that is given is for people to buy a $1500-$3000 car and then save the $4-600 a month on car payments to buy the next car cash, while pretty much neglecting the topic of upkeep on old beaters. As per many threads in this forum, we can all agree that a $1500-$3000 car will most of the time need $1000-3000 of work to be in top shape, reliable , and give you a piece of mind that it will start and not leave you stranded, unless you are a DIY person or got a previously owned well maintained car.
Many of my friends are now buying into this car advice, so my questions are:
Are they getting good advise or setting them up for trouble?
Do you consider car payments a waste or bad debt?
Should you buy a car cash only?
If you cant afford to buy a car cash, do you consider it that you cant afford the car and living above your means?
For people that take his/her advice, if your car broke down and you need a car ASAP, what other options do you have other than car payments if you dont have $3000, $5000, $10K set aside for a car?
Would you trade in your current car for a 10-15yrs old $1500 car, just so you dont have car payments aka debt?
I the interest of full disclosure, I am a Dave Ramsey trained financial counselor, so I give the same advice to my clients.
I drive a 2001 Jaguar S-type that I paid cash for about 8 years ago. This is a very expensive car to repair and I have had some breakdowns over the year, but only one that left me needing a tow.
On average I spend $700/year on repairs plus normal upkeep.
I take that car payment and save it to replace this car when it dies, but I like my car and plan to keep it a very long time.
I by into the advice, but to be fair I no longer take my car on cross country trips either. I now rent a car when driving more than 8 hours.
I the interest of full disclosure, I am a Dave Ramsey trained financial counselor, so I give the same advice to my clients.
I drive a 2001 Jaguar S-type that I paid cash for about 8 years ago. This is a very expensive car to repair and I have had some breakdowns over the year, but only one that left me needing a tow.
On average I spend $700/year on repairs plus normal upkeep.
I take that car payment and save it to replace this car when it dies, but I like my car and plan to keep it a very long time.
I by into the advice, but to be fair I no longer take my car on cross country trips either. I now rent a car when driving more than 8 hours.
Dan
OperationCare - Dave Ramsey Coaching
Do you have actual professional certifications, (CFP, CFA, CPA, etc.) or is being "Dave Ramsey Trained" the extent of it? Are you one of his "Endorsed Local Providers" or do you simply facilitate his Financial Peace University classes?
On average I spend $700/year on repairs plus normal upkeep.
I take that car payment and save it to replace this car when it dies, but I like my car and plan to keep it a very long time.
So, you make a car payment, just to yourself, and call it savings, AND you make repair payments. Vs someone who makes the same car payment on a new car but has no repair payments. Your budget really doesn't care that you're taking money out of your paycheck to save for a car or make payments on a car you have now. At least, I've never found it to be different to my paycheck...
So, you make a car payment, just to yourself, and call it savings, AND you make repair payments. Vs someone who makes the same car payment on a new car but has no repair payments. Your budget really doesn't care that you're taking money out of your paycheck to save for a car or make payments on a car you have now. At least, I've never found it to be different to my paycheck...
In the short run it may seem the same but in the long run it allows you to break free of the otherwise never-ending debt trap. After a few years you can have a new(er) car with low repairs costs and no payments...
In 2014 I paid off my truck. My payments were $420 per month. $420*12 = $5,040 per year.
Truck currently has 124k miles on it. I fully expect to see 400-500k miles out of it if maintained properly. (diesel)
In 2015, I spent the following on maintenance and repairs:
Radiator - $700
Rad cap - $20
Lower rad hoses - $270
Thermostat - $50
Coolant - $100
Oil changes * 2 - $150
Trans flush - $150
Total spent: $1,590
If I broke it down by month, I spent $132.50 per month on truck maintenance instead of a payment which saved me $287.50 per month (or $3,450 per year). In 2016, since I have resolved the cooling issues with the truck I would expect the savings to be greater. But even IF the cost was about the same I would have saved over $17k over the course of 5 years by not making payments. The savings from last year were split in half. Half paid for our upcoming vacation this summer, and the other half went into a college savings account for my kids.
Little savings do add up. Many of us don't NEED the latest and greatest of everything, just reliable and comfortable transportation that we can use to get us to the more important things in life... like sporting events for our kids, a nice dinner out (since we have no payment), that vacation we always wanted to go on... etc... and since we don't need to use all of that money, we still tuck some of it away while using some of it on the things we want.
No one has said squander every cent away, which is the argument that those who think they DO need those vehicles want to make. We're simply saying to choose what debt you carry wisely.
In the short run it may seem the same but in the long run it allows you to break free of the otherwise never-ending debt trap. After a few years you can have a new(er) car with low repairs costs and no payments...
And you have had to save up for those years to replace said car when it's broken to much to repair anymore. So it's the same thing to your paycheck and savings, you can just claim it's not debt. But it really is, just in a different form.
And you have had to save up for those years to replace said car when it's broken to much to repair anymore. So it's the same thing to your paycheck and savings, you can just claim it's not debt. But it really is, just in a different form.
I love the mental gymnastics that many people go through to try to justify to themselves that being in debt for a depreciating asset is a good thing.
I love the mental gymnastics that many people go through to try to justify to themselves that being in debt for a depreciating asset is a good thing.
I've bought cars with cash, financed them traditionally and leased. Depending on needs at the time, any one can be the right tool for the job. My current three cars run that gamut. My BMW was paid for in cash, my Suburban was financed with a loan and paid off in 6 months, and my wife's MINI is leased so that she can always be in a car with the latest safety gear and warranty and included maintenance so that it's a low, fixed cost and no unexpected costs to crop up.
I the interest of full disclosure, I am a Dave Ramsey trained financial counselor, so I give the same advice to my clients.
I drive a 2001 Jaguar S-type that I paid cash for about 8 years ago. This is a very expensive car to repair and I have had some breakdowns over the year, but only one that left me needing a tow.
On average I spend $700/year on repairs plus normal upkeep.
I take that car payment and save it to replace this car when it dies, but I like my car and plan to keep it a very long time.
I by into the advice, but to be fair I no longer take my car on cross country trips either. I now rent a car when driving more than 8 hours.
Dan
OperationCare - Dave Ramsey Coaching
On average in general its minimum of $4-500 a year to run a car with proper maintenance. Then that figure goes way up when stuff starts breaking.
These are typical items that every car needs per year if its your daily driver being driven 12-15k+ miles (2-4 oil changes ($75-120), 1 or 2 wheel alignments ($80-160) , 2-3 sets of wipers ($35-60), 1-2 air filters ($20-30), 2-3 wheel balances ($80).
Then add on any of the following items that can break or be needed on a older car.
Timing Belt $1000+
AC Compressor $500-1000
Tires $400+
Serpentine Belt $150
Brakes $2-400+ if you can d oit yourself
Transmission Fluid Flush $150-200
Coolant Flush $100
Tune Up $1-200
Fuel Pump $500-1000
Fuel Filter $100
Struts $500-1000
Ball Joints or Tie Rods $3-500
Battery $100
Any pretty much anything that breaks and goes to a shop when the car owner isnt a DIY person is going to cost about $150-200+ minimum.
For me in the past year on my 2000 Taurus, I spent $1000 for a new fuel pump, tires, belt tensioner, and then add on the oil changes, alignment, filters etc and Im at $1300
This year I will have to replace power steering pump, struts, both brakes, flush coolant & trans fluid and thats another $1500+ when I add in the usual required items, and this is assuming I do it all myself. For anyone else thats close to $2500
After all that I hear a ticking which could be the timing chain and thats easily a $1500+ repair and after that I will have a car with 250K with most repairs done but leaks oil and prays the engine and transmission lasts another 50-100K.
I could go on and on with the amount of people I know who dont know how to work on cars, that buy used cars cash ($2-4000) so they dont have payments, but car repairs they face yearly is the equivalent of a $200 a month car payment.
I agree with Dave Ramsey that is foolish to spend $450-600 a month on a car and used is better, but in reality a old car bought cash is pretty much the same as making a $200 a month car payment for 2-3+ years when all the items wear out and need replacing.
Person A pays $240 a month for 60 months with a 3% APR for a 1 year old used car they bought with 30K miles isnt much different than:
Person B buys a used car for $3-5000 cash with 120K+ miles and has to pay $1000+ a year in maintenance to have that car make it to another 100K miles, since after 150K many car parts have reached their useful life and need replacing or different things start happening with age n many cars..
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