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Economy

Dave Ramsey on buying a car with cash

2020-10-09

[Federalist] Dear Dave,

I decided a couple of years ago to start following your plan. Part of getting out of debt for me included paying off my car. I’m taking your advice, and saving up to pay cash for my next vehicle. I know you like mutual funds, so should I put the money I’m setting aside for that purchase in a mutual fund?

Corey

Dear Corey,

I’m glad to hear you’ve decided to get control of your money. Mutual funds are great for long-term investing, and by long-term investing I’m talking about a bare minimum of five years—preferably 10. But I wouldn’t recommend them as a way of saving up for a vehicle purchase. The problem with mutual funds, in the type of short-term scenario you’re talking about, is they can go up, or down, in value.

I’d suggest a simple savings or money market account when it comes to stashing the money you’re saving for a newer car. They don’t pay much in terms of interest, but your money will be safe, and you won’t have the ups and downs of the stock market to worry about.

Did you know the average monthly payment in America for a new car right now about $554 a month? It makes my head hurt to think about that much cash flying out the window every month on something that’s dropping in value like a rock. Even if you just stashed that kind of money in a shoebox you’d have over $6,600 saved in just a year. And despite what some people say, that’s enough to buy a dependable, pre-owned car.

Stick with the plan, Corey!

—Dave

Posted by:Besoeker

#5 #4 Wow, good information. Best to keep a low profile these days. They want a cashless society. In China an American jaywalked so in about 20 minuets he gets a text his bank account had been charged for his jaywalking. In the world of Obama you didn't earn that money anyway.

Posted by: Dale 2020-10-09 15:08

#4 You can pay for a car in full without actually giving the dealer cash. If you have a credit card with a high enough limit, use that and then pay the card off. That's better for your credit anyway. Or, write a check for the final amount and let the bank know ahead of time what is going on. A dealership can clear that check electronically on the spot with depositing it.

Paying for something and using a large sum of cash is only inviting unwanted prying into your personal business by entities whose attention you probably don't want.

Posted by: Kojo Grumble4926 2020-10-09 14:48

#3 I paid cash for a new car two years ago. The dealer did not want it. Wanted me to get a loan and pay it off. After paying for the car he said he could not give me the .37 cent change. I ended up taking a dollar back and made him run the .67 cents on a credit card. Two months after the purchase I was notified by the IRS and they looked into the sale. The USG and car dealer certainly dont want cash sales.

Posted by: 49 Pan 2020-10-09 14:14

#2 Only if you can get it, for some reason, despite my excellent credit, I never seems to get that zero interest rate, it's almost always 4% or higher and if you're even a day or so late with your payment, the interest automatically goes to 21 or 26% (whatever your state maximum rate is).

Posted by: Seeking Cure For Ignorance 2020-10-09 14:01

#1 Obviously nothing wrong with sound financial management, but lending rates for new cars are often quite favorable. 0.0% is a thing, and at that rate you are better off financing.

Posted by: Iblis 2020-10-09 10:19

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