Dave Ramsey: 4 Ways To Buy a Car Without Going Into Debt
When a caller told Dave Ramsey that his car blew up and he needed a new one, Ramsey didn’t hesitate to jump into asking a few questions to learn more about the caller’s situation and offer advice for buying a car without going into debt.
To help you do the same, we’re sharing Ramsey’s advice along with some tips from Kelly Blue Book about buying a car debt-free.
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Choose a Lower Priced Car
Kelley Blue Book puts the average price of a new vehicle around $50,000 and the average list price of a used car around $26,000. These are prices at dealerships, but you can look into buying from a private seller to save a substantial amount of money.
When the caller said he’s hoping to spend around $7,000 on a vehicle, Ramsey asks what he thinks the car was worth before it blew up. The caller estimates $3,000, so Ramsey points out that he really doesn’t need a car that costs $7,000. This essentially changes the math by $4,000 and makes buying a car with cash a more realistic possibility.
Sell What You Can and Use the Money for a Vehicle
Even though the caller’s car had “blown up,” Ramsey said that it would still probably bring $1,500 at the salvage yard and recommends starting with that. He asks the caller if he has other things to sell. Though he doesn’t, the point that Ramsey is making is that there may be things around your home that you could sell to get some cash together for a car purchase.
Do Something Weird
Getting out of and then staying out of debt takes real commitment. Ramsey said, “If I'm going to break a series of bad habits, or principles in my life, I have to adopt the extreme to complete the transformation in my heart.”
He goes on to recount his time driving a borrowed car while he was getting out of debt.
“I drove a 1978 Cadillac with 478,000 actual miles on it,” he recalled. “The predominant color was Bondo and the vinyl roof was torn loose across the front so when you drove it it filled up with air and looked like a parachute on a Bondo Buggy.”
During that time, he said he was so embarrassed that he saved a lot of money, so he could get another car. While he recognizes that not everyone has a car they can borrow, his point is that sometimes taking extreme measures can lead to financial stability and success in the future.
This is permission to do something weird. Borrow a vehicle from a friend or family member, carpool (or walk) to work, or buy a beater that will get you through until you can afford something nicer.
Don’t Tell the Dealer You’re Paying Cash Right Away
Beyond Ramsey’s advice, Kelly Blue Book recommends waiting to tell the dealer you’re paying cash until late in the negotiation, warning that “you may pay more for the vehicle if you mention your payment method early in the conversation.”
Staying a bit vague about your payment plans can work to your benefit, even saving you over $1,000 that the dealership may raise the price to make up for the profit they lose when you don’t finance the vehicle.
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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