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How Much of a Car Can I Afford? Dave Ramsey’s Rules Explained

 

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?

How Much of a Car Can I Afford? Dave Ramsey’s Rules Explained
How Much of a Car Can I Afford? Dave Ramsey’s Rules Explained

Dave Ramsey’s golden rule to calculate your affordable car price is:

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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?


 Practical Tips for Buying a Car Dave Ramsey Style


 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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