Dave Ramsey Warns of This Common Monthly Payment Costing You Millions

According to financial expert Dave Ramsey, there is one kind of monthly payment costing Americans millions of dollars over their lifetime, and they may not be aware of it.

In a 2024 video posted to X, Ramsey said the average car payment in America is $500 a month, but if individuals took that $500 a month and invested it from ages 30-70, they would have $5 million by retirement age.

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

(According to a recent report by Lending Tree, the average car payment in 2026 is $617 per month to lease a new car, $765 to finance a new car and $542 to finance a used car, which takes Ramey’s estimated $5 million retirement savings even higher.)

Ramsey’s logic is this: It doesn’t make sense to make car payments long-term because car payments are a form of debt, and debt keeps you in the red — it doesn’t help you build wealth.

Personal finance expert (and fellow 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 said that, by having a car payment, people would rather look wealthy but stay broke.

So what are some alternatives? Ramsey Solutions offered some advice.

Ways To Avoid Regular Car Payments

Buy a Used Car

They’re cheaper and can be just as reliable. Keep that car long-term. (Only buy a new car if your net worth exceeds $1 million).

Pay Cash

Don’t take out a loan to pay for a car. Loans come with interest. Instead, figure out how much you can realistically afford to shell out for the car. Per Ramsey: “The car you can afford is the car you can pay cash for up front.”

Save Up

If you don’t have the funds to outright purchase a car, don’t. Instead, work on lowering your expenses and saving up to buy the car later.

Caveat

Ashley Morgan, attorney and owner at Ashley F. Morgan Law, PC, said that, contrary to Ramsey’s one-size-fits-all belief, leasing a car may make sense in specific circumstances; you drive limited miles, you value predictable costs, you plan to replace your vehicle frequently and/or you constantly relocate.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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