Can I Afford an $80,000 Tesla?

Summary

Summary of "Can I Afford an $80,000 Tesla?" - The Ramsey Show Highlights

Release Date: January 8, 2025

In this episode of The Ramsey Show Highlights, hosted by George Kamel and featuring Rachel Cruze, the discussion centers around the financial viability of purchasing an $80,000 Tesla Model S. The conversation delves into key financial principles advocated by the Ramsey Network, providing listeners with actionable advice on managing significant expenditures without compromising their financial stability.

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Caller’s Financial Situation

The episode opens with a caller seeking advice on whether purchasing an $80,000 Tesla Model S is a financially sound decision. The caller provides the following financial details:

• Annual Income: $360,000
• Net Worth: $1.2 million (excluding the house)

George Kamel begins by acknowledging the appeal of owning a Tesla, stating, “Nice car.” ([00:19])

Assessing Affordability

George systematically assesses the caller’s situation based on three primary criteria:

1. Net Worth Requirement:

   • Quote: “We tell people not to buy a brand new car unless they've got at least a million dollar net worth.” ([00:34])
   • Explanation: George emphasizes that a net worth exceeding $1 million is a benchmark for considering the purchase of a new vehicle, ensuring that the investment aligns with one’s overall financial health.

2. Cash Payment Capability:

   • Quote: “You got the cash to pay cash for it?” ([00:39])
   • Explanation: Paying for the car in cash eliminates the burden of debt and interest payments, aligning with Ramsey’s debt-free philosophy.

3. Affordability Relative to Income:

   • Quote: “Things with motors and wheels, in your case, wheels all added together that equal more than half your annual income.” ([01:07])
   • Explanation: George advises that the cost of the vehicle should not exceed half of the buyer’s annual income. In this scenario, $80,000 is less than half of the caller’s $360,000 income, deeming it affordable.

After confirming that the caller meets all three criteria, George concludes, “You checked all three boxes.” ([02:46])

Understanding Depreciating Assets

A significant portion of the discussion focuses on the nature of cars as depreciating assets:

• Quote: “New cars go down in value, including Teslas. They don't go up, they go down.” ([00:34])
• Explanation: George underscores that while Teslas are technologically advanced, they still depreciate in value once purchased, a crucial consideration for financially prudent individuals.

He further elaborates on the impact of depreciation with an anecdote:

• Quote: “I have a friend that made 15 million last year and he bought a $428,000 car. That kind of blows my redneck mind.” ([01:28])
• Explanation: This example illustrates that even high earners can overspend on depreciating assets, highlighting the importance of aligning purchases with long-term financial goals.

Balancing Financial Logic with Personal Preferences

The conversation takes a lighter turn as George and Rachel discuss personal preferences in vehicle aesthetics, particularly the contrast between traditional gas-powered cars and electric Teslas.

• Rachel Cruze: “He's done it the right way.” ([02:46])
• George Kamel: Expresses his appreciation for Tesla’s design but humorously laments the lack of traditional features like a loud muffler, saying, “I need like an app for it that makes some muffler sound.” ([03:15])
• Rachel Cruze: Playfully counters, “They do that. You know, they have these cars...” ([03:25])

This exchange highlights the balance between adhering to financial principles and accommodating personal tastes.

Key Takeaways

1. Net Worth Assessment: Ensure that your net worth supports significant purchases without jeopardizing financial stability.
2. Cash Purchases Over Debt: Opting to pay cash for large expenses helps avoid debt and interest, aligning with a debt-free lifestyle.
3. Affordability Relative to Income: Keep major purchases below half of your annual income to maintain financial flexibility.
4. Depreciation Awareness: Recognize that vehicles are depreciating assets and plan purchases accordingly.
5. Personal Preferences Matter: While financial logic is crucial, personal enjoyment and satisfaction from purchases are also important considerations.

Notable Quotes with Attribution and Timestamps

• George Kamel: “We tell people not to buy a brand new car unless they've got at least a million dollar net worth.” ([00:34])
• George Kamel: “New cars go down in value, including Teslas. They don't go up, they go down.” ([00:34])
• George Kamel: “You got the cash to pay cash for it?” ([00:39])
• George Kamel: “Things with motors and wheels... more than half your annual income.” ([01:07])
• George Kamel: “You made 360, you can afford a $80,000 car. You got a million dollar plus net worth. You can afford to buy a brand new car.” ([02:46])
• Rachel Cruze: “He's done it the right way.” ([02:46])
• George Kamel: “I need like an app for it that makes some muffler sound.” ([03:15])

Conclusion

This episode provides a comprehensive framework for evaluating the affordability of high-end vehicles like the Tesla Model S. By adhering to the principles of assessing net worth, opting for cash payments, and ensuring that expenditures are proportionate to income, individuals can make informed and financially responsible decisions. Additionally, the conversation acknowledges the importance of personal preferences, illustrating that financial prudence and personal satisfaction can coexist harmoniously.

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This detailed summary encapsulates the essence of the episode, providing readers with a clear understanding of the financial considerations discussed, enriched with direct quotes and structured sections for easy navigation.

Transcript

[Dave Ramsey]

Brought to you by chm, a biblically based alternative to health insurance. Learn [e-mail] budget I just wanted yalls.

[Caller]

Take on making sure I'm not crazy and considering an eighty thousand dollar new car. A Tesla model S. Cool.

[George Kamel]

Nice car.

[Caller]

Yes, sir.

[George Kamel]

All right, so what do you make?

[Caller]

Well, I make $360,000 a year.

[George Kamel]

Cool. What's your net worth?

[Caller]

I've got without the house included.

[George Kamel]

No house is part of your net worth. What's your net worth?

[Caller]

Okay. About 1.2 million.

[George Kamel]

All right. You got the cash to pay cash for it?

[Caller]

I do.

[George Kamel]

Okay. Buy it.

[Caller]

Okay.

[George Kamel]

Let me tell you what. Let me tell you the rule of thumb I use on this, okay? The reason I ask you those questions. We tell people not to buy a brand new car unless they've got at least a million dollar net worth. Ding. Check box. Okay. Because new cars go down in value, including Teslas. They don't go up, they go down. And you can't afford a depreciating asset that's brand new when you drive it off the lot. That sound bloom bloom when you go over the curb was 10,000 bucks, okay? That's what it is. You got to be able to choke that down. And you can choke it down. And you don't buy new unless you got a million dollar net worth. You do. Okay. Second thing is, don't buy depreciating assets. Things with motors and wheels, in your case, wheels all added together that equal more than half your annual income. You make 360. We're buying 80. That's less than half your annual income. I'm assuming the other car, if there is one, is not, you know, not a $200,000 car. So you're probably okay.

[Caller]

Yes, sir.

[George Kamel]

Okay. So because you don't want too much of too much as a percentage of your income invested in things that are going down in value again, same thing. So like I got a friend that made 15 million last year and he bought a $428,000 car. That kind of blows my redneck mind. I have my head. I have a hard time getting my head around that. But it's a very small percentage of his income. It's like most people buying a biscuit. Right. And so, yeah, it's not going to hurt his finances at all. Even though, you know, we, you know, jealous people say stuff like, well, no one should ever. Right? That's what jealous people should ever. So you got. If you made 15 million last year, you can afford a $400,000 car. It's that simple. You made 360. You can afford a $80,000 car. You got a million dollar plus net worth. You can afford to buy a brand new car. That's how I just. And you're paying cash. You're not going to borrow money. That's the three things I was looking for. You. You checked all three boxes? Yeah.

[Rachel Cruze]

And hey, he's done it the right way. And so this is.

[George Kamel]

He's.

[Rachel Cruze]

He's had to wait. That's the other thing that when, when, when Dave walks through those.

[George Kamel]

I'm just glad George and Rachel are in the air with their little Teslas. Yeah.

[Rachel Cruze]

Yeah.

[George Kamel]

Because I would have had to put up with a Tesla stuff telling a guy to buy a Tesla because there's no chance I'm doing that. But those two both are Tesla drivers. So you just. Batteries.

[Rachel Cruze]

Even if they came out with a really cool looking one.

[George Kamel]

They're. They are. They actually are a cool car. I just, I need.

[Rachel Cruze]

You want to.

[George Kamel]

I need like an app for it that makes some muffler sound.

[Rachel Cruze]

Right.

[George Kamel]

Because a redneck needs a loud muffler and that's just all there is to it.

[Rachel Cruze]

They do that. You know, they have these car.

[George Kamel]

They really.

[Rachel Cruze]

Yes, absolutely. But I don't think it's enough for you.

[George Kamel]

No, it's not.

[Rachel Cruze]

I think you want to still know.

[George Kamel]

I'm sitting on a battery.

[Rachel Cruze]

You like the hint of petrol in the air.

[George Kamel]

That's it.

[Rachel Cruze]

That's. You want to smell that you're driving.

[George Kamel]

It's actually I'm trying to help the planet. Well, I mean the planet gets destroyed by making those batteries more than me driving my Raptor, I can tell you that.

[Rachel Cruze]

Oh, so you're green. Is that what I mean?

[George Kamel]

That's it, man. I'm, I'm totally okay. I'm down with the green. Right? Not at all.

[Rachel Cruze]

But yeah, it's very exciting.

[George Kamel]

Funny. I don't care what you say.

[Dave Ramsey]

CHM isn't health insurance is a health cost sharing ministry. Check it out for [e-mail] budget.