How Much of a Car Can I Afford? Dave Ramsey’s Rules Explained
By Md Emran Khan | July 13, 2025
If you’ve ever asked yourself, “How much car can I really afford?” you’re not alone. Financial expert Dave Ramsey has some simple but strict rules that millions follow to avoid getting trapped in car debt.
Dave Ramsey’s Car Buying Guidelines
Dave Ramsey, famous for his “Baby Steps” money plan, says:
1. Pay cash for your car whenever possible
He strongly advises avoiding car loans altogether. The best way? Save up and pay the full price in cash.
2. If you must finance, never finance more than 36 months
Short loans mean less interest paid and less risk of being upside down on your loan.
3. Keep your total vehicle expenses under 15% of your monthly take-home pay
This includes your monthly payment, insurance, gas, and maintenance.
4. Never buy a new car if you can get a reliable used one
New cars depreciate quickly; used cars save you money.
| Source | Type | Description | Link |
|---|---|---|---|
| DaveRamsey.com – Car Buying Tips | Official Website | Dave Ramsey’s personal advice on car buying and financing. | Visit |
| Ramsey Solutions YouTube Channel | Video Content | Dave’s explanation on auto loans, budgeting, and financing. | Watch |
| Forbes – Dave Ramsey’s Car Buying Advice | Financial Media | Analysis and summary of Dave Ramsey’s approach to auto loans and budgeting. | Read |
| NerdWallet – How Much Car Can I Afford? | Calculator Tool | Online calculator inspired by Dave Ramsey’s guidelines to estimate affordable car price. | Try |
| Investopedia – Car Loan Basics | Educational Site | Explains loan terms and financing basics related to auto loans. | Learn |
| Kelley Blue Book – Car Buying Tips | Auto Industry Guide | Trusted source on car valuation, pricing, and budgeting. | Explore |
How Much Car Can You Afford?
Dave Ramsey’s golden rule to calculate your affordable car price is:
==============================================================
No more than 25% of your annual take-home pay.
Example:
If you take home $60,000 a year, you should spend no more than $15,000 on a car.
Why Follow These Rules?
- Avoid debt traps
- Keep your emergency fund intact
- Focus on paying off other debts first (baby steps!)
- Build long-term wealth instead of car payments
Practical Tips for Buying a Car Dave Ramsey Style
- Save for a 20% down payment if financing
- Buy cars with good resale value
- Use apps like Kelley Blue Book or Edmunds to check fair prices
- Consider certified pre-owned for warranty and peace of mind
Summary Table: Dave Ramsey Car Affordability Rules
| Rule Number | Recommendation | Explanation |
|---|---|---|
| 1 | Pay cash if possible | Avoid interest and debt |
| 2 | Finance max 36 months | Shorter loans save money |
| 3 | Vehicle expenses ≤ 15% of take-home | Includes payment, insurance, fuel |
| 4 | Buy used over new | Avoid depreciation loss |
| 5 | Spend ≤ 25% of annual take-home pay | Keeps budget manageable |
FAQ: Dave Ramsey Car Buying Tips
Q: Can I finance longer than 36 months?
A: Dave recommends against it because interest costs rise and you risk owing more than the car is worth.
Q: What if I don’t have cash saved?
A: Focus on building your emergency fund and paying off debts first. Then save for a car.
Q: Are new cars always a bad idea?
A: Not always, but usually they depreciate 20–30% in the first year.
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Md Emran Khan is a passionate news writer and digital content creator focused on delivering clear, insightful, and timely updates on finance, technology, and current events. With a knack for breaking down complex topics into engaging stories, Emran aims to keep readers informed and empowered to make smart decisions. Based in USA, he blends global trends with local perspectives to bring a fresh voice to the news landscape.
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