Dave Ramsey’s Anti-Car-Payment Rule Is Only Mostly Right
A $600 car payment feels manageable until you do the math on what it costs you by age 65. Ramsey has long argued that car payments are one of the fastest ways to destroy long-term wealth, and Orman has made…
A $600 car payment feels manageable until you do the math on what it costs you by age 65. Ramsey has long argued that car payments are one of the fastest ways to destroy long-term wealth, and Orman has made the same case from a different angle, warning that Americans treat depreciating vehicles like status symbols while retirement accounts sit underfunded. Two advisors with very different audiences arriving at the same conclusion is worth paying attention to. A recurring car payment is a wealth transfer away from your future self.
The Numbers Behind the Warning
The concern is grounded in real data. The average 48-month new auto loan rate at commercial banks was over 7.5% as recently as late last year. At that rate, financing a $40,000 vehicle means paying meaningfully more than the sticker price over the life of the loan, while the car loses value every month.
Meanwhile, the personal savings rate fell from 6.2% in Q1 2024 to 3.6% in Q4 2025, the lowest point in that dataset. Disposable personal income reached $23,112.4 billion in Q4 2025, yet consumption kept pace, leaving less room for retirement contributions. A fixed monthly car payment is exactly the kind of obligation that crowds out savings when budgets tighten.
Total consumer credit outstanding reached $5,109,419.57 million in December 2025, sitting at the 90th percentile historically. Americans are carrying more debt, not less.
Where the Advice Holds Up Best
For a 45-year-old earning $80,000 with a $550 monthly car payment and only $60,000 saved for retirement, the warning is essentially correct. That payment, redirected into a 401(k) over 20 years, compounds into a materially different retirement outcome. The math favors driving a paid-off older vehicle and investing the difference.
Where It Gets More Complicated
The advice assumes a car payment is always optional. For many households, reliable transportation is non-negotiable for employment, and a cheap used car can carry its own costs in repairs. The real question is not whether to finance, but how much vehicle relative to income. Financing a $20,000 car at 7.5% on a $90,000 salary is a different problem than financing a $55,000 truck on a $55,000 salary.
Consumer sentiment sat at 56.4 as of January 2026, well below the neutral threshold of 80, reflecting a public that already feels financially stretched. In that environment, thinking carefully before adding a car payment means the case for avoiding a new car payment becomes harder to dismiss. The question every reader should ask is whether their current vehicle costs are proportional to their retirement savings rate, and if not, which one needs to change.
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Austin Smith is a financial publisher with over two decades of experience as an investor, analyst, and advisor. He covers stocks, ETFs, Artificial intelligence and personal finance for 24/7 Wall St. Previously, he spent over a decade at The Motley Fool as a senior editor for Fool.com, portfolio advisor for Millionacres, and launched The Ascent to help reader take control of their personal finances.
His work has been featured on Fool.com, NPR, CNBC, USA Today, Yahoo Finance, MSN, AOL, Marketwatch, and many other publications. He is as an advisor to private companies, and co-hosts The AI Investor Podcast with Eric Bleeker.
When not looking for investment opportunities, he can be found skiing, running, or playing soccer with his children. Learn more about Austin's investment approach here.
