Nothing wrong with buying used cars as long as they are in good shape. If you want to change cars every 3 years then buying used is much better. If you keep a car 7 or more years then buying new works out OK.
Wait a sec. You bought a piece of crap car, so that makes Dave Ramsey a bad financial adviser? Wow.
I suppose you think it is sound financial advice to tell everyone to buy a new car?
I can’t imagine why you suppose that.
I think it is sound financial advice not to give dull, overworked and misleading platitudes and try to sell them as sound financial advice. He would be just as helpful to say “Only make good money decisions, and stay away from bad investments.” I could tell people that, and charge less than one of his seminars, and it would be just as beneficial.
The whole point being, his little gem of wisdom is a gem of crap. He’d better tell people how to tell a sound, used car before saying it is wrong to buy a new one.
hh
If you can distill how to do that into a book or a seminar, I will go into debt to pay for it!
hh
His whole philosophy is that you should limit the amount of risk in your life. A car payment = risk. If you lose your income for some reason, and you can’t make your payments - you lose the car. If you own a car outright and something happens to you, you don’t have to worry about losing your car. If you’re doing his debt-snowball and really focusing on getting rid of all of your debt, why would you want to be sending $300 a month towards a car payment when you could be paying off your debt that much faster.
It’s a solid philosophy, and honestly - why would you want to buy only new cars??? The value drops 20% at least as soon as you drive it off the lot. If you insist on having a car payment, why not buy something a year or two old that’s already been broken in a bit and wont’ drop in value as fast?
I’m not sure if he talks about it on his show, but Ramsey went bankrupt a while back. You would think that influences his opinions on debt.
BTW, a car payment is not some huge risk. If the car is not brand new you can sell it to pay off the loan and buy a cheaper car if you can no longer afford the payment. For example right now I owe $3000 on a car worth $18k. So if I sold the car I would walk away with $15k to buy another car with no loan. I was able to do this by putting down a large amount when I bought the car.
In my experience, he talks about his bankruptcy about every 10 minutes. His advice against using debt to buy a car has more to do with people spending way more than they would have had they paid cash. Most people can’t afford to drop 30K on a car, and are forced to get a 10K car instead if they pay cash.
hh, I have no idea what your point is supposed to be. Ramsey isn’t a car expert, he’s simply telling people that buying a new car is a very bad idea, financially. That isn’t as obvious to a lot of people as you imply. Besides that, nothing you’ve pointed to is a particularly logical reason to loathe someone as a financial adviser.
Bijou Drains - Many, many people today finance their new cars for 5-6 years, (more than 1/3 the time for my whole mortgage!), so they never have a car worth $18K that they owe $3K on. Most people who buy new do it often, or at least regularly. And most are upsided-down on the value of their car when they trade it in, leading to the balance being tacked on to their latest mistake.
Dave Ramsey often mentions his bankruptcy and finanial ruin. That’s why he’s so anti-credit. Because he made and lost a fortune by borrowing unwisely.
StG
I guess it’s strange I have never heard him mention his bankruptcy. I don’t listen to him for long stretches but I do listen a little bit most days.
BTW, most people pay off their credit card balance every month. So there is nothing about having a credit card that makes people run up $20k in debt. It makes it easy to run up debt, but those people would probably find another way if they didn’t have a CC.
I’m not certain that this is true. I’m not saying it’s wrong, but I wouldn’t be surprised in the least to find out that it is.
ETA: Here is what I was able to find:
Approximately 74.9 percent of the U.S. families surveyed in 2004 had credit cards, and 58 percent of those families carried a balance. In 2001, 76.2 percent of families had credit cards, and 55 percent of those families carried a balance. (Source: Federal Reserve Bulletin, February 2006)
About a quarter have no credit cards, and an additional 30 percent or so pay off their balances every month. (Source: Federal Reserve Board survey of consumer finances, 2004)
One more stat:
The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008. One year earlier, that average was $10,637. (Source: Nilson Report, April 2009)
Could you provide a cite for this? I pay my credit card off in full each month, but I believe the exact opposite of what you wrote here. I think most people DON’T pay off their balance each month.
From this source it says that 58-60% carry a balance–that would suggest that most people don’t pay the balance each month.
*Of the 73.0 percent of families with credit cards in 2007, only 60.3 percent had a balance at the time of the interview; in 2004, 74.9 percent had cards, and 58.0 percent of these families had an outstanding balance on them. (Source: Federal Reserve Survey of Consumer Finances, February 2009)
In 2007, fewer than half of U.S. families (46.1 percent) held credit card debt. That’s virtually unchanged from 2004’s 46.2 percent number. (Source: Federal Reserve Survey of Consumer Finances, February 2009)*
I read somewhere that 60% pay it off every month so that must have been wrong or else they used a different way to calculate the number. Or maybe it was just old data.
Another thing about Ramsey I don’t care for is that he is constantly trying to make a buck off his advice. All the books, seminars, referrals, etc. Isn’t it amazing that all his advice ends up putting more cash in his pocket?
So? I’d love to be able to help people like that & make a living off of it. It isn’t as though he isn’t generous with his money. He’s open about the amount he gives away, and will often dramatically drop the prices of his books and services so that people who can’t afford them can do so. He also gives a huge number of seminars and books away via his radio show.
I just don’t see what’s wrong with making money. He isn’t claiming to be running a charity.
There is nothing wrong with making money but when you are giving out advice I like to know you are giving out the best advice , not advice that is 100% geared towards what you sell. In those cases you aren’t giving advice, you are just giving a sales pitch and pretend it’s advice.
I’m not personally a fan of Dave Ramsey - his advice is simplistic, it isn’t very good when you move from the “debt” stage to the “asset acquisition” stage. I don’t like how he uses religion to shill for him. I find his writing and speaking style grating. But those are my issues, not really his.
But, I like the effect Dave Ramsey has on people who buy into him - for people who follow his program and become debt free, its like finding God - its a life changing experience that you can’t understand why everyone hasn’t done. His steps are so simple that as long as you aren’t so far buried as to be unable to dig out, you can do it. And since I’m a huge believer in financial responsibility - and found that God myself several years ago - I’m willing to overlook the prophet bringing people into the true religion.
I would say the exact same thing. I am in great financial shape, but only because quite a few years ago I had my own awakening and poof the light bulb went on for me. For some people it takes a Orman or a Ramsey to get them there, so be it. At least they are getting out of debt. Once you understand the basics and simplistic views they offer there are some great resources–but those resources would be way beyond understanding if you don’t have the simple concepts down first.
My impression of Ramsey is that his demographic is people like me: dumb. Seriously, he is for people who are ignorant of financial matters, have poor discipline, and/or have a lot of debt. He’s the guy who tells people not to cosign a loan with their drug addict brother, or works out for them that paying the minimum balance on their cards will pay of the debt in 182 years.
If you are more sophisticated, have a lot of money to dispose of, and/or have very good self control, his advice probably doesn’t apply to you.
We actually have used both his advice (for our dumb credit card debt) and advice from a professional financial planner (for our retirement planning and insurance decisions). They’re for different things - that doesn’t make Ramsey useless across the board.
That does not follow. it is possible to give good advice that is also geared toward what you sell. It is quite common.
Very good post. The people I know who have gotten out of debt as a result of Dave Ramsey use the word inspirational. I can certainly see how liberating it might be to go from desperate to financially secure.