Generally speaking, Dave Ramsey and his cohorts have a history of giving some terrible and frankly unhelpful advice when it comes to buying a car. However, in this case of a young crypto investor who is “bad at planning,” Ramsey’s buy a cheap car and have no debt approach would have been beneficial.
I came across this Instagram clip for a financial podcast from George Kamel, a Ramsey disciple who also serves as a host for the Dave Ramsey show. Kamel has his own call in program with a familiar format. Folks that have made a bad money decision ask advice on how to handle it, then proceed to get judged accordingly.
This episode centers around what I assume to be a gentleman in his 20s who wants to know if he should cash out his cryptocurrency to pay off his car loan. This is a simple enough question, but it gets interesting when the hosts dig a little deeper.
This guy, who is soon to be married, and makes $50,000 a year bought a Tesla with a retail price of $51,000. Frankly, I am as shocked as you are that someone who has the financial smarts to invest in Ethereum didn’t realize that buying a car that is more than your salary is bad math. In fairness to the caller, he didn’t make a completely boneheaded move and financed the car completely. He put a sizeable downpayment of around $23,000. Now that his Etherum has gone up to over $20,000 he wanted to know if he should cash it out and pay off his car loan which has a remaining balance of $17,000.
The host never got around to answering the question, and I was not able to find the full show on YouTube. While I am no “financial guru,” my take is that he has a “currency” that can fluctuate wildly in value that is currently beneficial and a car loan that is very real. The smart play would be to use the profit and get rid of the debt. Of course, we can debate the time value of money and interest accruing investments, over holding a debt with a reasonable interest rate. But this guy makes $50,000 a year (which I assume is before taxes), he needs to keep as much of that take-home money as possible.
Furthermore, he probably would have been wiser in 2021 to use Ramsey’s tactic of buying a quality used car in cash and putting some money aside for a rainy day. Granted that car would not be as “cool” as a Tesla but likely also would not be worth a fraction of the original retail price.
Of course, callers like this one are why Ramsey is so popular. My position has been that you don’t necessarily need Ramsey’s “brand” of financial advice to make better money decisions, there are a lot of so-called “smart” people that would benefit from a financial reality check.
Tom McParland is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He takes the hassle out of buying or leasing a car. Got a car buying question? Send it to Tom@AutomatchConsulting.com
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