Jun 5, 2026
When it comes to the relationship one has with their car, you come first; the car comes second.
That’s the advice financial guru Dave Ramsey offered Carl from New York when the 29-year-old father called into The Ramsey Show.
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“Love yourself enough not to go into car debt,” Ramsey told him. “If you want to be middle class, stay in car debt. You will never build wealth because it will suck the bone marrow out of your money.”
Carl added that he recently got a pay bump from $85,000 to a possible $95,000 after six months, and his current Honda isn’t worth fixing. He has $20,000 in savings for a new car, but the one he wants costs $25,000.
“Don’t celebrate your new job with a car payment. That’s kind of dumb,” Ramsey said. “You have $20,000 and an $85,000 job in New York City. You can go buy a $20,000 car and not a dime more,” Ramsey said.
He told Carl his budget is whatever he sells the Honda for, plus the $20,000. According to a recent study, $100,000 in Manhattan is equivalent to about $30,362 — the lowest purchasing power of any city on a list of 20.
Nix the conspicuous consumption
Ramsey linked the affordability crisis to high car payments. A Bank of America report found that in 2025, nearly a quarter of households live paycheck to paycheck.
“Ford Motor Company screwed you. Lexus and Toyota screwed you,” he said. “They got you to go far in debt because you had to have something shiny with a toxic plastic smell.”
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Ramsey used Carl’s situation to make a broader point, citing internal research of more than 10,000 millionaires showing that 84% credited ditching car payments as key to building their wealth.
Ramsey suggested that Carl stop caring about what people think and move away from seeing his car as a status symbol.
“Decide who you want to impress. People you’re likely never going to meet, or your grandchildren,” he added. “Because you can change your family tree if you don’t impress the people at the stoplight,” Ramsey said.
“You are upgrading so far from the hooptie you’ve been driving, you ought to be dancing in the streets with that $20,000, acting like you have got a new Porsche,” Ramsey added.
Co-host Jade Warshaw chimed in, suggesting that buying a car in cash is “countercultural,” to which Ramsey replied, “well the majority of Americans are broke.”
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What percentage of millionaires credited ditching car payments as key to wealth building?
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Car debt draining pockets
According to CNBC, total auto debt hit $1.68 trillion at the end of 2025 — an increase of 37% since late 2018.
Over that period, the typical monthly auto loan payment rose from $506 to $680. Experian data placed the average monthly payment for a new vehicle even higher at $770 as of the first quarter of 2026. About 37% of American households have two cars, and one in four carry car loan debt.
Ramit Sethi, another personal finance guru, echoed that sentiment and suggested following the 20/4/10 rule to avoid going car poor. The strategy includes a 20% minimum down payment, a maximum loan term of four years to reduce interest, and no more than 10% of monthly income spent on vehicle expenses — including loan payments, insurance, gas and maintenance.
Ramsey, though, maintains that everyday Americans should avoid car loans altogether.
“You don’t go into car debt ever if you want to build wealth,” he said.
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Amanda Smith is an Australian freelance journalist and writer based in the New York City area who reports on culture/society, technology, and health.
