‘Please don’t do this’: Dave Ramsey says to ditch this one household expense keeping Americans from becoming wealthy

Aditi Ganguly

Tue, August 25, 2026 at 7:05 PM GMT+3 8 min read

The Ramsey Show

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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 (1).

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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 (2).

Cut 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 (3).

"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."

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."

What you can do

According to CNBC, total auto debt hit $1.68 trillion at the end of 2025 — an increase of 37% since late 2018 (4).

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 (5). About 37% of American households (6) have two cars and one in four carry car loan debt (4).

If you're struggling with making your car payments timely, or feel squeezed by the payments straining your budget, consider the following options.

Refinance your car loan

As a first step, you may want to consider refinancing your car loan to reduce your monthly payments.

Thanks to the Fed's December rate cuts, refinancing could free up extra cash every month. In fact, a recent survey conducted by LendingTree found that those who shopped around for car loan rates and chose the lowest one saved an average of $1,346 (7).

You can compare auto loan refinance rates offered by lenders near you for free through LendingTree.

Here's how it works: Just answer a few simple questions about yourself and the vehicle you drive — and LendingTree will connect you with two to five lenders from their network of more than 300 lenders.

LendingTree users saved an average of $142 per month on their auto loans by refinancing. And because insurance inquiries don't require a hard credit pull, browsing offers won't impact your credit score — guaranteed.

You may be eligible for refinance loans starting at 5.04% APR through LendingTree's network.

Tackle your insurance bill

With household budgets already stretched by higher prices, rising car insurance premiums have become another unwelcome expense. Higher repair costs, more expensive vehicles, increased accident claims and persistent inflation have all pushed insurers to raise rates.

Even drivers with clean records may be paying significantly more today than they were just a few years ago. That's why it pays to periodically revisit your policy.

You can shop around and compare quotes from reputable insurance providers near you through Insurify. By comparing quotes and selecting the best deal, you can see an average potential savings of $1,100.

Just answer a few basic questions and Insurify will show you the most affordable deals in as little as 3 minutes.

Not only is the process 100% free, but you could also save up to 15% by bundling your car and home insurance.

Evaluate your finances before making a purchase

If you're planning to buy a car in the near future, it may be worth following the popular 20/4/10 rule. Personal finance expert Ramit Sethi recommends this approach as a way to avoid becoming car poor (8).

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.

Make a budget

Before buying a new car, it's important to understand how the purchase fits into your broader financial picture. The monthly payment is only part of the equation — you'll also need to account for insurance, fuel, maintenance, registration fees and unexpected repairs.

Creating a budget beforehand can help you determine whether a vehicle comfortably fits within your spending plan or whether it could strain your finances. Knowing exactly where your money is going each month makes it easier to identify how much you can realistically afford to spend without sacrificing other priorities.

If you're looking for a way to structure your spending, you can consider creating a custom budget to track where your money is going at all times with Monarch Money.

Monarch Money puts all your finances under one roof, from your banking statements to your investments. Once you link your accounts — including investments and real estate — you will be able to view every transaction through one clean, searchable list.

Money also helps you forecast your spending beyond just one month, as well as save for big goals along the way.

You can get a seven-day free trial to see if it's right for you. And if you like the platform, you can get 50% off for your first year with the code WISE50.

Work with an expert

If you're on the fence about buying a new car, it may be worth speaking with a financial professional before making a decision.

What seems affordable today could have ripple effects on other financial priorities, especially if you're already managing competing goals. A vehicle purchase can affect everything from your monthly cash flow to your ability to save for retirement, build an emergency fund or pay down debt.

That's why it can be helpful to get a second opinion.

You can connect with a vetted FINRA/SEC-registered advisor near you for free through Advisor.com.

Just enter a few details about your finances and goals and Advisor.com's AI-powered matching tool will connect you with a qualified expert best-suited for your needs based on your unique financial goals and preferences.

The best part? Advisor.com lets you set up a free initial consultation, with no obligation to hire, to see if they're the right fit for you.

- With files from Amanda Louise Smith.