‘You’re trading dollars for quarters’: NY woman intrigued by pre-tax lease perk offered by her work — why Dave Ramsey insists she slam on the brakes

“Leasing is the most expensive way to operate a vehicle, mathematically. It’s a rip-off,” Ramsey explained [1]. “... you’re buying a new car and it goes down in value like a rock and all of the lost appreciation is built into the lease payment.”

Even with a pre-tax perk, to him the math doesn’t add up. “You’re trading dollars for quarters,” he said, explaining that chasing the tax break is not worth it since you’ll end up overspending on a lease.

“A 100% of the time that you do something only because of the tax, it’s a bad deal,” he said. “Simply pay cash for your car. And if they want to give you some more money at work, I'll take it.”

So what should Rosie do instead?

Auto lending market in crisis

When it came to Rosie’s question, Ramsey warned, “You're financing something you cannot afford to buy. And you're calling it smart because of some little quasi-tax break.”

Americans are struggling to afford their cars. They owe a massive $1.66 trillion in auto loans, making it the second-largest household debt category after mortgages, according to the Federal Reserve Bank of New York.

A 2019 report from the U.S. Public Interest Research Group (PIRG) said that most Americans finance their cars, with about 85% of new cars and 53% of used cars bought with loans [2].

But the auto lending market is in a crisis, according to the Consumer Federation of America [3]. “The percentage of auto borrowers with severely delinquent debt (defined as 90+ days past due) is at its highest since the peak of the COVID lockdown, and before that, the Great Recession,” it noted, citing a Federal Reserve Bank of Philadelphia report.

According to a recent report from Edmunds, the average monthly payment for a new car hit $756 in Q2 2025, and used cars averaged $559 a month [4]. Nearly 1 in 5 new-car buyers signed up for a $1,000+ monthly payment during the quarter. Edmunds found that nearly a quarter of new-car loans now run 84 months or more.

"While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks associated with a loan extended that far into the future, including increased costs for upkeep down the line and the risk of being underwater on the loan if the car is traded in before it's paid off," said Joseph Yoon, Edmunds' consumer insights analyst.

Pros and Cons – cash vs financing vs leasing

So, what’s the smartest way to buy your next set of wheels: cash, financing, or leasing?

Paying cash: The gold standard

If paying outright won’t send you into credit-card debt, it’s almost always the best move.

• Pro: You avoid interest, own the car immediately, and have the flexibility to sell whenever you want.
• Con: It’s a big chunk of money up front, and could drain your savings if you don’t have an emergency fund built up.

Financing: The American default

Financing is popular because monthly payments are more manageable than a lump sum, and ownership beats the never-ending cycle of leasing.

• Pro: Loans spread the cost over time with monthly payments, and eventually you’ll own the vehicle.
• Con: Interest adds up. In data as of March 2025, the average APR on a new-car loan was around 6.7%, while used-car loans averaged nearly 12%, according to Experian [5].

Leasing: Lower payments

Leasing can make sense if you want the latest model every few years, but financially, it’s closer to renting than owning. "If payments on a more standard 60- or 72-month loan don't fit your budget, you might consider leasing. While you won't be building equity in your vehicle the way you do with a purchase, leases afford time to get your finances in better shape with lower monthly payments in the meantime," said Edmunds' Yoon.

• Pro: Smaller monthly payments, newer cars, and warranty coverage.
• Con: You don’t build equity and will not own the car, there are mileage limits and wear-and-tear fees, and it’s hard to get out of the lease.

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