'Broke for the rest of your life': Dave Ramsey says this 'really, extremely' stupid purchase is the No. 1 thing new college grads get wrong

What could be the problem? Well, Ava is considering financing a brand Tesla Model Y. “Dave’s favorite car,” co-host Rachel Cruze joked as she read Ava’s letter.

Ava was quoted an out-the-door price of $53,000, with an APR of 2% on her car loan. “If I put down $23,000 [the] monthly payment will be $442 for 72 months,” Ava wrote.

“Obviously, the smarter decision is to buy a used Tesla with cash, then to buy the Model Y in a few years. But I’ve been obsessing about this for several months now, and I want to get in if I can. How stupid is this decision?”

Ramsey’s reply? “Really. Extremely.”

High prices, high interest rates

It’s no secret that buying a new car these days isn’t cheap. The average transaction price (ATP) for a new car surpassed $50,000 for the first time ever in 2025, — though in June it sat at $49,758 and has held below $50,000 throughout 2026, according to Kelley Blue Book.

And interest rates don’t help the matter. Data from the Federal Reserve Bank of St. Louis shows the average 60-month auto loan rate at commercial banks is sitting at 7.14% as of May.

Americans are also taking out longer-term loans to grapple with higher prices. An analysis by the Century Foundation found that by the end of 2025, 14.7% of new auto loans had terms of seven years or more. “Compared to early 2018, the prevalence of seven-year loans has approximately doubled,” the report found.

With this in mind, it’s no surprise Ramsey was firmly in the “no” camp when it came to Ava’s question about buying a new car.

“No. 1 mistake people make when they graduate from college: buy a new car,” Ramsey said.

“‘I’ve been driving my high school/college car and it’s a hooptie, and now I make big money and so I’m going to prove I’m a graduated adult,’ and you go buy a stupid brand new car,” Ramsey continued.

“A new car loses 75% of its value in the first four years. Teslas are worse than that. Go look at a four- or five-year-old Tesla and [...] look at how much they’ve gone down in value.”

Cruze agreed, saying “Buy that. Buy the four [or] five year old.” This, perhaps predictably, descended into an argument between the hosts over electric vehicles, with Cruze, a Tesla driver, arguing in favor of the technology.

“Dave just hates electric cars,” Cruze said.

“I do hate electric cars,” Ramsey said, “but I hate the value drop too.”

One thing the hosts agreed on was that Ava should buy a used car. Ramsey then laid out his rules of thumb on auto purchases.

“If you have to finance it, you can’t buy it. And it shouldn’t be more than half your annual income. And if you can’t pay cash, don’t buy it.”

Ramsey also added that he believes you should “buy a used car unless you have at least a million-dollar net worth.”

“And quit obsessing over new cars,” he added. “That’s going to make you broke the rest of your life.”

Cruze added, “You say the phrase all the time: car payments is what keeps you …” Ramsey finished the thought: “middle class.”

Cruze broke the idea down further, saying “it’s the borrowing, paying interest on something that’s going down in value. All, really, for a status type of life is really what you’re trying to buy.”

“If you invested that car payment over the course of your life, I mean, it’s millions of dollars that you’re giving to the bank or the car dealer versus you. And so the financing of the cars, not smart.”

Ramsey did the math on a scenario where Ava instead invested those car payments, finding that “$442 from age 23 to age 65 in a decent growth stock mutual fund is $4.7 million.”