Should We Buy A Bigger Car Or Pay Down Our House?

Summary

Ramsey Everyday Millionaires: Should We Buy A Bigger Car Or Pay Down Our House?

Episode Release Date: March 24, 2025
Hosts: Dave Ramsey, Rachel Cruze

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Introduction

In this episode of Ramsey Everyday Millionaires, host Rachel Cruze welcomes a listener, Zach from Albany, New York, who presents a common financial dilemma: whether to buy a bigger car or pay down their mortgage. With Zach and his wife navigating through Baby Steps Four, Five, and Six, their decision-making process offers valuable insights for other millionaires balancing lifestyle upgrades with financial goals.

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Caller Situation: Zach's Dilemma

Timestamp [00:25 - 01:37]

Zach explains that he and his wife are debating whether to purchase a new vehicle or pay off their house. They are considering upgrading from a smaller SUV to a GMC Yukon, anticipating the need for more space as they plan to welcome a second child. The desired Yukon is projected to cost between $50,000 to $60,000, and their annual household income is approximately $315,000. They currently have a $186,000 mortgage and an $80,000 brokerage account earmarked for potential land purchases, now reconsidered due to expanding their family.

Key Points:

• Current income: ~$315,000 annually
• Mortgage balance: $186,000
• Brokerage savings: $80,000
• Desired vehicle: Used GMC Yukon ($50k-$60k)
• Family expansion: Potential second child

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Hosts' Analysis and Recommendations

Timestamp [02:00 - 06:40]

Rachel Cruze and Dave Ramsey delve into Zach's situation, evaluating the financial implications of each option. Rachel emphasizes the importance of distinguishing between wants and needs, cautioning against lifestyle creep—the gradual shift from saving to spending beyond one's means.

Notable Quotes:

• Dave Ramsey [00:59]: "How big is your baby that you need a Yukon?"
• Rachel Cruze [03:00]: "Is there a third option in there? That feels good to both of you."
• Rachel Cruze [04:03]: "Lifestyle creep ... what we need versus what we want starts to really blur."

Rachel suggests exploring a third option that satisfies both Zach's desire for a better vehicle and their financial objectives. She encourages Zach to honestly assess whether the new car is a necessity or a desire, highlighting that their current SUV can accommodate their needs, albeit snugly.

Zach admits that while he is a saver, his wife has a tendency to spend on things she values. Despite this, both acknowledge their generally frugal lifestyle, making the purchase manageable within their financial framework.

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Decision and Conclusion

Timestamp [06:40 - 07:52]

After thorough discussion, Rachel and Dave conclude that given Zach and his wife's substantial income and low mortgage balance, purchasing the used GMC Yukon is a sensible choice. Rachel commends Zach for his responsible financial planning and reassures that their decision won't derail their financial stability.

Notable Quotes:

• Rachel Cruze [06:29]: "You're a great husband, Zach. So, yeah, I would move forward. I would buy it."
• Dave Ramsey [07:02]: "Good move. Good move. Good man."
• Rachel Cruze [07:40]: "Babies can make everything very emotional, though."

The hosts applaud Zach's balanced approach—maintaining a strong financial foundation while considering personal and family comfort. They reinforce that with Zach's income and savings, purchasing the larger vehicle while continuing to pay down the mortgage aligns with their financial goals.

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Key Takeaways

1. Assess Needs vs. Wants: Clearly differentiate between necessities and lifestyle desires to prevent lifestyle creep.
2. Financial Flexibility: With a high income and substantial savings, making significant purchases can be feasible without compromising financial security.
3. Open Communication: Honest discussions between spouses about financial priorities ensure mutual understanding and support.
4. Strategic Planning: Utilizing available resources (e.g., brokerage account) judiciously can help balance immediate desires with long-term goals.

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Conclusion

Zach and his wife exemplify how millionaires can thoughtfully navigate financial decisions by balancing personal desires with financial discipline. By choosing to purchase a larger SUV while maintaining their mortgage payments, they demonstrate that with careful planning and open communication, it’s possible to enjoy lifestyle upgrades without sacrificing financial stability.

Final Thought from Dave Ramsey [07:27]: "There's no wrong answer here, but I would defer to the pregnant woman because I'm scared of them."

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For more insights and personalized financial advice, connect with a Ramsey Network professional or visit RamseySolutions.com.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor all right, let's go to the phones.

[Rachel Cruze]

And we have Zach in Albany, New York. Hi, Zach. Welcome to the show.

[Zach]

Hey, guys, how are you? Thanks for having me on the show.

[Rachel Cruze]

Absolutely. How can we help?

[Zach]

So my wife and I are having a debate. We're on baby steps four, five and six, and we're having a debate to whether pay our house off or to buy a new vehicle.

[Rachel Cruze]

All right, so tell me about the car. What car do you want to replace?

[Zach]

We want to replace her car. It's a smaller SUV and it gets a little crammed with the baby seat in there. And we may be expecting a second one. So she would like to upgrade in vehicle so we're not crammed into her car.

[Rachel Cruze]

Okay. So it's more of a. More of a convenience upgrade, if you will. Not that the car is falling apart and we have to replace it. So not urgent, but more just out of like. Yeah, the convenience of.

[Dave Ramsey]

Stupid question. Could you get like a slimmer baby seat and solve all of this?

[Zach]

I don't know if they make those, but I guess I could look.

[Dave Ramsey]

Oh, they do. I've done my baby seat research, my friend. But anyways, let's talk more about this. What is that car gonna cost? This she wants.

[Zach]

She's looking at a GMC Yukon. We would buy used, not new.

[Dave Ramsey]

How big is your baby, man?

[Zach]

What's that?

[Dave Ramsey]

How big is your baby that you need a Yukon?

[Zach]

Well, we already have one and we would like that. You know, we may have maybe having a second one soon. So just. Just comfort, you know.

[Dave Ramsey]

Okay.

[Rachel Cruze]

Yeah, okay.

[Zach]

It would be in the price range of like, be nice to Zach.

[Rachel Cruze]

50,000?

[Zach]

Yeah, 50 to 60,000. We are on baby steps four or five and six. We are baby steps millionaires.

[Rachel Cruze]

How much you guys make a year?

[Zach]

We make. We made 290this year and we're on track to make about 315. This incredible.

[Rachel Cruze]

Good for you guys. Good for you guys.

[Dave Ramsey]

What's left on the mortgage?

[Zach]

The mortgage is 186 and we would be paying cash from a brokerage account that's non retirement that we've been saving up for land. But we put a kibosh on that idea since we may be having a second baby now.

[Rachel Cruze]

Okay, okay.

[Dave Ramsey]

How much is in there?

[Rachel Cruze]

Priorities have shifted. Yeah. How much is in the brokerage account?

[Zach]

About 80,000.

[Dave Ramsey]

Okay.

[Rachel Cruze]

Okay.

[Dave Ramsey]

So either way, we're not going to pay off the house with this lump sum. But you're saying, should we take that 80 and put it toward the mortgage or toward the car?

[Zach]

Correct. So my thought was I'm more of the saver. My wife's a little bit more of the spender. My thought was if we took the entire brokerage account, put it on the house, we could pay it off in about a year and a half and then take the mortgage payment and everything else and save up for a car.

[Dave Ramsey]

Okay.

[Rachel Cruze]

Yes. I mean, so, yeah, either way, Zach, let me say this. Routes A or B would work. Okay. So I always like to find, I don't know, road C. Like, is there, like, a third option in there? That feels. That feels good to both of you. Meaning you're running the numbers in the math. You're seeing, oh, my gosh, if we put 80 grand towards this house, you know, you're putting towards the principal. Like, you're not gonna. Like, you're seeing the math. Like, really, you know, it's on your side majorly in that way, Zach. So that totally makes sense. So I'm. I'm just wondering if, you know, you guys don't have a second kid, and I think what you both need to say say, because you haven't really said it on this call, and I think I just need to hear it from you that you guys do not need this car. That people function with two babies and Camrys all the time. And is it squished? Absolutely. But, like, you guys would be. Okay. Can we just. Can we say that out loud?

[Zach]

I 100 agree. I. I'm trying to be a good husband and do right by my wife.

[Rachel Cruze]

Because I am the money nerd making.

[Zach]

And I know this is something she wants.

[Rachel Cruze]

I hear you. I hear you.

[Zach]

Hard for our money.

[Rachel Cruze]

Totally. No, no, I hear you. And the car is not bad. Getting an. Getting a Yukon is not bad, Zach. At all. But does. But I. I want to make sure, because this is where lifestyle creep a little bit starts to play in. And I think if you both said, yes, we do not need this, like, we would be fine. We could have two babies in the car that we have now. It's a small suv. We would be fine. But I would love a. I would love a great suv. Like, that's what I would love. I would love it.

[Dave Ramsey]

Rachel said what I said, just in a nicer way. And America loves it.

[Rachel Cruze]

But I want her. I want her and I want you guys on the same page of why you're buying it, because I don't want her to be like, no, no, no. It's like, I have to have this. Like, I can't. It's. It is just too. Everything is just too small. And I can't do it because if that starts to be the mindset, what's going to end up happening again. It's lifestyle creep. Your life just starts. You spend more and more and more and more, and what we need versus what we want starts to really blur. So I think I would feel better if I knew, Zach, that both of you were like, yes, we do not need this car. We would like this car. Listen, Zach, I have a minivan. I would love a Yukon. Like, I get it, right? I would want one. I don't need one, but I would. I. I would want one.

[Dave Ramsey]

So second, caveat. She's not pregnant.

[Zach]

Well, she is. We just haven't told anyone yet.

[Rachel Cruze]

Oh, my gosh.

[Dave Ramsey]

Such an honor. Okay, that changes.

[Rachel Cruze]

And Aunt Ray Ray, we are the first to know the news because it.

[Dave Ramsey]

Was kind of like, well, we might have one. Like, okay, well, might is different than she is pregnant. And so there is an actual timeline now of all nine months from now. We would want a bigger car. So here's my. And this is coming from Mr. Frugality, who was like, I'm going to pay off the house before I upgrade my car. Now, we didn't have a kid then, so it's different, but I'm, I'm going, hey, let's cash out the brokerage. We're going to pay some taxes on it. Let's buy her, set a budget. $50,000. We're going to get her a Yukon. Whatever's left, we're going to throw at the house. And then we're going to be gun ho getting rid of this mortgage. Was that, would that be a fair game plan?

[Zach]

Because either way, yeah, that's a great. That's a great option.

[Rachel Cruze]

Yeah.

[Dave Ramsey]

With your income, the house is paid off within a year or two, right?

[Rachel Cruze]

Yeah. You guys are going to be fine, especially because of your income. Right. If you, if you guys were making 100 grand, I would slow all of this way down. But you could say you're buying too.

[Dave Ramsey]

Much car, but you guys make $300,000.

[Rachel Cruze]

My question answered, Zach, do you think your wife does. She will. She would she emotionally say, yes, this is a complete want. It's not like a need. Like, we absolutely have to have it.

[Zach]

She acknowledges that it is a complete want.

[Rachel Cruze]

That's great.

[Zach]

And like, we're both. I mean, I'm more of the saver, but we're Both pretty frugal.

[Rachel Cruze]

Yep.

[Zach]

And so when she wants something, it's really not too often. And so I'm just trying to make that happen for her.

[Rachel Cruze]

Totally. No, I hear you. Yes. You're. You're a great husband, Zach. So, yeah, I would move forward. I would buy it. And again, especially that since you guys for sure are having to. And from an income standpoint, what you guys have left on the mortgage and all of it, I think, yeah, I think you guys will be in a great, a great position and you guys.

[Dave Ramsey]

Are baby steps millionaires. So I'm just curious, are you going to buy new or no?

[Rachel Cruze]

He said. He said use. He said used.

[Zach]

It would. It would be certified. Certified mileage.

[Dave Ramsey]

Good move. Good move. Good man. Let someone else take that first hit on depreciation. Yeah, you guys are doing it by the book. I'm proud of you guys. There's no wrong answer here, but I would defer to the pregnant woman because I'm scared of them.

[Zach]

Me too.

[Dave Ramsey]

You don't want to mess with them, man. I'm just saying it's.

[Rachel Cruze]

It's a sensitive. Yeah. Sensitive line there. Huh?

[Dave Ramsey]

And this is a very similar situation because my wife wanted the bougie mom SUV and it hurt my soul because I can do math, but life isn't math. She wanted the car. We saved up. We paid cash for it and she.

[Rachel Cruze]

Loves it and it's fine.

[Dave Ramsey]

And it was her dream. I don't need to make everything my dream.

[Rachel Cruze]

I will say babies can make everything very emotional, though. So I'm glad that Zach's sticking to the facts and the numbers and the numbers look great. So permission to spend.

[Dave Ramsey]

Zach, A Yukon can hold two seven pound babies at least. Bare minimum.

[Rachel Cruze]

Bare minimum. And congrats, Zach. We're. We are excited for you.

[Dave Ramsey]

Thanks for tuning in to Ramsey Everyday millionaires. Need help with your investments? Connect with a smartvestor [e-mail] smartvestor or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.