When to Buy a Better Car

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Dear Dave,

My wife and I are following your plan, and we’re in the middle of the Baby Steps. Do we have to wait until Baby Step 7 to buy a new car? — Alan

 

Dear Alan,

No, you don’t have to drive a beater until you pay off your house. My advice is to drive the minimum car you can until you get past the first three steps. Remember, Baby Step 1 is a beginner emergency fund of $1,000. Baby Step 2 is paying off all debt except for your house, then Baby Step 3 is fully funding your emergency fund with three to six months of expenses.

Once you’ve done all that, then you can move up to a nice car. I didn’t say move up to a new car. I want you to save up cash a get a really nice, barely used car. I never advise buying a brand new car unless you have a net worth of at least $1 million. At that point, you’ve got enough assets in place to where you won’t even feel the massive hit in depreciation that comes with buying a new vehicle.

But until then, drive good used cars. That’s what the typical millionaire did, and I want you to model your financial behavior after people who are in the position you want to be in some day! — Dave

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About Author

Dave Ramsey

America's trusted voice on money and business, Dave Ramsey is a personal money-management expert and extremely popular national radio personality. His four New York Times best-selling books—Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership—have sold more than 7 million copies combined. His latest book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches, debuted at number one on the New York Times best-selling list.

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