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Drive Free, Retire Rich

“I’ll always have a car payment.” How many times have you heard that? Or its cousin sentence, “Car payments are just part of life”? Okay, so that might be normal—but this is one of many times when normal sucks.


Let’s see how this “always have a car payment” cycle is holding people back from really moving forward with their money. And how a shift in mindset (and in where that car payment is actually going) could set you up for some serious riches in retirement.

First, here are some important numbers:

  •  The average new car payment is $577.1
  • The average used car payment is $413.2
  • The average new car cost is $41,378.3
  • New cars lose 60% of their value in the first five years.4

What’s the True Cost of Car Payments?

Now, let’s work some math. (We used our handy Investment Calculator for this.)

Let’s say that at 21, instead of taking out a car loan, you invested that $577 every month. At an annual return of 11%, you’d have $9,630,619 when you retire at age 67.

That’s nearly $10 million—just for putting that new car payment into retirement instead of a hunk of steel that loses 60% of its value over the first five years of its life.

Speaking of losing 60%, let’s do that math on that too. If the average new car costs $41,378, its value drops to $16,551 after five years. That’s $24,826 down the drain.

But what if you invested that $577 for five years? Well, instead of losing $24,826, you’d make $45,881. In the same amount of time! With the same amount of money!

Suddenly, you’re owning and growing that money—not practically throwing it out the car window.

In each of the examples, it’s super clear that avoiding car loans is worth it. So, get on a budget, save up cash for your car, and build wealth! (By the way, we have an awesome free budgeting tool called EveryDollar. You should download it and set up a car sinking fund. Just saying.)

It’s time to flip the script on always having a car payment. Invest that money each month into something that prospers instead of plummets.

You decide. Drive like everyone else now or thrive like no one else later.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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