Dave Ramsey has a blunt warning about the expense keeping most Americans from building wealth

For many Americans, getting a raise feels like the perfect excuse to upgrade their car.

Dave Ramsey thinks that's a foolish way to waste money.

On a recent episode of The Ramsey Show, a 29-year-old father from New York called in after landing a higher-paying job. He had saved $20,000 toward a replacement vehicle, but the car he wanted cost $25,000. He asked Ramsey whether financing the remaining $5,000 made sense.

Ramsey's answer was immediate: Don't borrow another dime.

Instead, he told the caller to buy a $20,000 vehicle with cash — plus whatever he could get by selling his current Honda — and avoid taking on a car payment altogether.

For Ramsey, the issue wasn't the size of the loan. It was the mindset behind it.

Ramsey says raises shouldn't become excuses to borrow more

The caller explained that he currently earns about $85,000 annually and expects that to rise to roughly $95,000 after six months on the job. His current Honda had reached the point where repairing it no longer made financial sense.

Many financial advisors would consider financing $5,000 to be relatively modest, particularly for someone with significant savings and stable (even growing) income.

Ramsey disagreed.

"Don't celebrate your new job with a car payment," he told the caller. Instead, he argued that the buyer's budget should simply be whatever cash he already has available, plus the proceeds from selling his current vehicle.

The message reflects Ramsey's long-standing philosophy that lifestyle inflation prevents people from building wealth. Rather than allowing higher income to justify larger monthly payments, he encourages people to keep spending below what they can technically afford.

Americans are carrying more car debt than ever

Ramsey's advice comes as auto borrowing continues climbing nationwide.

According to the Federal Reserve Bank of New York, Americans owed approximately $1.69 trillion in auto loan debt in early 2026.

Car loans have also become substantially more expensive over the past several years.

Data from Cox Automotive shows the average monthly payment on a new vehicle has climbed to about $757 per month, while many buyers are stretching loans across six or even seven years to keep payments manageable.

Meanwhile, data shows that roughly one in four American adults carries outstanding auto loan debt.

Those monthly payments may not seem overwhelming on their own, but they compete with other financial priorities such as emergency savings, retirement investing, homeownership, and paying down higher-interest debt.

Ramsey believes car payments quietly slow wealth building

Ramsey has long argued that automobiles are one of the fastest-depreciating purchases most people will ever make.

Unlike a home or retirement investments, vehicles typically lose value over time while continuing to generate expenses for insurance, maintenance, registration, fuel, and repairs.

Adding loan payments on top of those costs can consume hundreds of dollars each month that could otherwise be invested.

During the call, Ramsey pointed to his company's research involving more than 10,000 millionaires. According to Ramsey Solutions, 84% said avoiding car payments played a significant role in helping them build wealth.

While that finding reflects Ramsey's own research rather than an independent academic study, it supports the broader philosophy he teaches: Minimizing debt allows more income to remain invested over long periods.

A small loan today can become an expensive habit

In the caller's case, borrowing $5,000 probably wouldn't create a financial emergency.

Ramsey's concern was less about the amount than the mindset, a shift toward bad habits and lifestyle inflation.

If financing becomes the default response every time income rises or a nicer vehicle catches someone's eye, debt normalizes. Small loans can gradually become larger ones.

That's particularly relevant in today's vehicle market, where higher prices have made financing commonplace.

Many buyers who initially plan to borrow only a few thousand dollars ultimately stretch their budgets much further once monthly payment calculations enter the picture.

Today, the typical amount financed for a new vehicle has reached a record high. Finance companies financed an average of $42,504 for new car purchases in early 2026, up from $35,307 in 2021, for an increase of more than 20% in just five years.

Bottom line

Ramsey's advice isn't really about buying a cheaper car. It's about deciding what matters more over the long term.

During the call, he challenged listeners to think about who they're trying to impress: strangers sitting beside them at a stoplight or future generations of their own family.

A newer vehicle may deliver temporary satisfaction, but monthly payments can linger for years. Buying less than you can technically afford may not feel exciting in the moment, but it can leave more money available to start investing, build an emergency fund, or pursue other long-term financial goals.

For Ramsey, that's the tradeoff every car buyer should keep in mind before signing a loan agreement.