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View this post on InstagramThe average length of a car loan, according to NerdWallet, is 68 months (5.5 years), with an average payment of $941.36. Putting all those numbers together, you’ll see that by the time you pay off your new car, you’ll have lost $30,000 in value and also paid interest on your loan.
Related: Dave Ramsey Tells Caller To Stop Using His Program And Do This Instead
What A Car Costs In 2026
Instead of buying the new car for $50,000, you could’ve purchased a used car for just over half the price. With payments reduced to around $489.51, you have a difference of $451.85. This is where Ramsey’s investment logic really comes into play.
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Let’s start from scratch and invest the $450 in savings from the first month we buy our used car. We will invest the same amount monthly for 45 years, the typical amount of time most people spend in their careers.
We will estimate a modest 6% rate of return with interest compounding daily. By the end of that investment, our total will be $1,252,556. Ramsey’s estimate is actually under the projected return. However, a 6% rate of return is extremely modest.
According to NerdWallet, the average rate of return, measured by the S&P for the last century, has been closer to 10% annually. If we plug that number into our calculator, then our return jumps significantly to $4,825,082! That’s almost 5 times Ramsey’s estimate!
New cars are nice to have, but continuing to purchase them may actually be the single biggest problem standing between you and a million-dollar future.
Disclaimer: This article is for informational purposes only and does not constitute advice.
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