I Can't Afford My $1,200 Car Payment

Summary

Podcast Summary: The Ramsey Show Highlights – "I Can't Afford My $1,200 Car Payment"

Episode Overview In the February 27, 2025 release of The Ramsey Show Highlights, the Ramsey Network addresses a pressing financial concern from a young listener, Alex. At just 23 years old, Alex grapples with substantial debt, including a burdensome $1,200 monthly car payment. Hosted by Dave Ramsey and featuring insights from George Kamel, the episode delves into practical strategies for managing overwhelming debt without resorting to bankruptcy.

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1. Caller’s Financial Predicament

Alex’s Situation ([00:02] - [00:32])

Alex initiates the conversation by outlining his daunting financial landscape:

• Total Debt: Approximately $90,000
  • Car Loan: $47,000 with a $1,200 monthly payment
  • Student Loans: $37,000
  • Credit Card Debt: $6,000
• Income Fluctuation: Originally earning around $150,000 annually, Alex’s income plummeted to $60,000 after losing two jobs.
• Current Progress: Alex has completed Baby Step #1 and is actively working on Baby Step #2.
• Consideration of Bankruptcy: Influenced by his mother’s suggestion, Alex contemplates filing for bankruptcy but seeks alternative solutions.

Notable Quote:

“When I bought the car, I was making roughly $150 per year. Lost both those jobs, and now I make about $60 per year. And just wondering, should I voluntarily surrender my car?”
— Alex [00:02]

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2. Expert Advice on Managing Debt

a. Evaluating Bankruptcy ([00:26] - [01:21])

Dave Ramsey quickly dismisses bankruptcy as a viable option for Alex, emphasizing that Alex is not at a point where bankruptcy is necessary:

“No, on the bankruptcy side, I’ll just say that we’re not there.”
— Dave Ramsey [00:26]

b. Addressing the Car Loan ([01:21] - [07:56])

George Kamel expands on the implications of surrendering the car:

• Negative Equity Issue: The car is valued at $25,000, but Alex owes $47,000, resulting in a $22,000 shortfall.
• Voluntary Repossession Pitfalls: Selling the car privately won’t bridge the gap, as auction prices are typically lower, leaving Alex still responsible for the remaining debt.
• Alternative Solutions:
  • Sell the Car: Attempt to sell the vehicle privately to recover some funds, though this may not cover the entirety of the loan.
  • Credit Union Loan: Seek a loan from a local credit union to cover the $22,000 difference and purchase a more affordable, “beater” car.
  • Lifestyle Adjustments: Drastically reduce expenses, potentially taking on additional jobs or side hustles to increase income.

Notable Quotes:

“Instead of a voluntary repo, could you sell it and come up with the amount you're underwater on?”
— George Kamel [01:42]

“I’d rather you be 25 grand in debt driving a beater than 47 grand in debt.”
— George Kamel [04:19]

c. Strategic Financial Planning ([05:03] - [07:56])

Dave Ramsey and George discuss the importance of tackling high-interest debts and possibly restructuring financial obligations:

• Debt Snowball Method: Focus on paying off smaller debts first to gain momentum while managing the larger car loan.
• Income Enhancement: Elevate Alex’s income from $60,000 to potentially $75,000-$80,000 by securing a better-paying job and exploring side income opportunities.
• Lifestyle Sacrifices: Implement strict budgeting measures, eliminating non-essential expenditures such as dining out and social activities to free up funds for debt repayment.

Notable Quotes:

“That is because I do wonder, Alex too, if you paid off the six credit cards and did just the traditional debt snowball, how much payments monthly will be freed up...”
— Dave Ramsey [05:14]

“This is no eating out. This is... you’re working three jobs. It’s not going to be a fun journey.”
— George Kamel [06:46]

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3. Key Insights and Recommendations

• Avoid Bankruptcy: At Alex’s stage, there are feasible avenues to manage and reduce debt without the long-term repercussions of bankruptcy.
• Address Car Debt Strategically:
  • Seek Loan Assistance: Engage with credit unions for possible loans to handle negative equity.
  • Opt for a More Affordable Vehicle: Transitioning to a less expensive car can significantly reduce monthly financial strain.
• Increase Income and Reduce Expenses:
  • Job Advancement: Pursue higher-paying roles or additional job opportunities to boost earnings.
  • Strict Budgeting: Implement rigorous budgeting to minimize expenses and prioritize debt repayment.
• Leverage Youth as an Asset: Being young provides Alex with time to recover and rebuild his financial standing, reinforcing that setbacks can be overcome with disciplined financial management.

Notable Quotes:

“We're trying to find another solution where you come up with the difference... You don't need to file for bankruptcy.”
— George Kamel [07:22]

“We learn from our mistakes.”
— Dave Ramsey [07:30]

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4. Conclusion

In this episode, Dave Ramsey and George Kamel provide Alex with a compassionate yet pragmatic roadmap to navigate his overwhelming debt. By discouraging bankruptcy and advocating for strategic financial restructuring, they empower Alex to take actionable steps toward financial recovery. The episode underscores the importance of proactive debt management, income enhancement, and lifestyle adjustments, offering valuable lessons for listeners facing similar financial challenges.

Final Thoughts:

“Learn from our mistakes.”
— Dave Ramsey [07:30]

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Additional Resources For more information on managing debt and refining your financial strategy, visit the Ramsey Network or consult financial experts featured in the podcast, including Rachel Cruze, Dr. John Delony, George Kamel, and Jade Warshaw.

Transcript

[Alex]

Brought to you by Y Refi Refinance your defaulted private student loans [e-mail] Ramsey so I am 23 years old. I roughly have about 90,000 in debt. 47 of that is a car loan. My payment per month is $1,200.

[Dave Ramsey]

Okay.

[Alex]

When I bought the car, I was making roughly 150 per year. Lost both those jobs, and now I make about 60 per year. And just wondering, should I voluntarily surrender my car? I really can't afford it anymore. Between rent and cost of living, I have 47 on the car, about 37 in student loans, and 6,000 on credit cards. I did complete baby step number one, working on number two. My mom also mentioned that she thinks I should file for bankruptcy. I'm not sure if that's the best solution, but I just wanted to get your guys thought on that.

[Dave Ramsey]

No, on the bankruptcy side, I'll just. I'll just say that. Yeah, first and foremost, we're not there.

[George]

We're not even close. So there's some, some good news for you. I think mom wants you to get a clean slate and she's kind of wanting you to just shortcut this and, and be free. Pain. But there's better options here. And so let's talk about the car. Instead of a voluntary, you know, repo, could you sell it and come up with the mount you're underwater on?

[Alex]

The car is only worth about 25.

[George]

So did you roll negative equity?

[Alex]

I might be able to, but no.

[George]

Did.

[Dave Ramsey]

Did you from a previous car?

[George]

How do you owe 50 grand and the car is worth less than half of that?

[Alex]

The interest on it is 25%. Oh, when I bought the car, it was during COVID I needed a new car, didn't have much credit, and they would only approve me for a brand new car. I could not get approved for a used card.

[George]

And you said, Sure, 25% sounds good. That's reasonable. Let's go. I need this $50,000 car.

[Dave Ramsey]

And when you're making 150, this is the problem. You feel like, okay, well, I can afford the payments, and if I can afford the payment, everything's fine. And, and that's the backwards way of, of going into. When it comes to buying a car. But that's what a lot of people do. I can afford the payment. So regardless of how much interest it is, I can afford it. And then life happens as you've experienced. Okay, job wise, Alex, what have you. What were you doing before? You said you had two jobs that you lost. What were Those.

[Alex]

I was a payroll manager for IT company, and then I was an assistant manager for every retail store.

[Dave Ramsey]

Okay, and what happened to those jobs?

[Alex]

The retail store ended up closing down, and I wasn't able to get relocated, and the IT firm also shut down.

[Dave Ramsey]

Oh, okay. So both companies closed. What are you doing now?

[Alex]

I work in IT still on, like, the administrative side.

[Dave Ramsey]

Okay. Okay. Single family, Kids? Single.

[Alex]

Okay.

[George]

Where are you living?

[Alex]

Cleveland.

[George]

Okay. Are you living alone? Renting.

[Alex]

Rent with a roommate. 1300 Split between the two of us.

[Dave Ramsey]

Okay, that's good. Okay. So, yeah, I mean, the getting the car out, the 25,000 that it's worth. Where did you pull that number from? From a dealership or from, like, Kelley Blue Book?

[Alex]

Kelley Blue Book and a couple other, like, just look like browsing. Seeing, like, what? Similar.

[George]

But it's not trade in value. That's private party value.

[Alex]

Yes. Private party.

[George]

Oh, man.

[Dave Ramsey]

Yep.

[George]

Because the problem is you need to come up with the difference. Even if you do a voluntary repossession, they're gonna sell it at auction for way less than it's even worth, and you're still gonna owe the difference.

[Dave Ramsey]

Yeah.

[George]

So it doesn't really. It doesn't solve all of your problems to even do the voluntary repo. That's why we're trying to find another solution where you come up with the difference. I'd rather you be 25 grand in debt driving a beater than 47 grand in debt.

[Alex]

Yeah, and that's. That's kind of my thought process, too. Trust me, I know this was probably the worst financial decision I've ever made, but, yeah, I rather drive a hooptie at this point than, you know, drive.

[Dave Ramsey]

Are you able to keep current with your other bills, Alex, right now making 60? Yes, you are. So this credit card debt is not ongoing to keep lights on and everything?

[Alex]

No, I'm slowly paying that off, thankfully.

[Dave Ramsey]

I mean, honestly, Alex, if I were in your shoes, I mean, I would figure out a way. I mean, it's about 18k for the difference of the car, and you're probably not going to be able to get a loan for the difference.

[George]

We said you. You owe 47 on the car.

[Dave Ramsey]

43. Oh, 47. Oh, I wrote the 43.

[Alex]

Yeah.

[Dave Ramsey]

Okay, so you're 22,000.

[George]

22 under. So that, I mean, ideally we'd say, hey, go to your local credit union, get a loan for the difference, maybe 25 grand, and spend three of that on a beater car, but I don't know that they'd even grant you that loan. At this point.

[Dave Ramsey]

Have you tried?

[Alex]

No, I haven't tried. I kind of wanted to search all my options beforehand.

[Dave Ramsey]

Sure.

[George]

That's the, the least harmful of the options is to go to a credit union and see if you can get the difference in a loan and maybe a little bit more in order to get a beater car. Get rid of this payment and then you'll be climbing your way out of this and then hopefully in the meantime, we can get your income back up to six figures. Clearly you're skilled enough and you're willing to do the work.

[Dave Ramsey]

Yeah, for sure. Yeah. If you can get that 60 up for a full time job and find something 75 or 80. Right. In like a perfect world. And then the side hustle is what I mean, that's what I would be doing, Alex. And I'm like, if you can make God, I mean you'd have to make 3,000 extra a month. I mean, I'm trying to do the math of how to do this within a year to get to even save the amount for the difference. Right. So best bets, you can take a loan for the difference. And like George said earlier, a local credit union is going to be your best bet versus a bank. They're the ones that are probably actually going to sit down with you and run more numbers and look. Um, but, so that would be my first option. And then if not, that's probably what I would do. I would probably try to get out of this car before anything else. Even before the.

[George]

It solves half your problems.

[Dave Ramsey]

Yep.

[Alex]

Yeah.

[George]

If you can get out of that and then now the second half, at least that's bearable and you can climb out of that pretty quickly. Even making what you make, it's, it's a solvable problem. But I do think income's the biggest part. And then your lifestyle is gonna have to get cut down to nothing for probably the next 18 months.

[Alex]

Yeah.

[George]

And so this is no eating out. This is. Hey, the roommate wants. Sorry I can't hang out. I'm working three jobs. It's, it's not going to be a fun journey. But the good news is you're young enough that you have a lot of time to make up for this and so all hope is not lost. You don't need to go file for bankruptcy.

[Dave Ramsey]

George, would you, if you were him, would you save the 25,000 first, get the car out and then do the debt snowball or would you still.

[George]

I know, I just don't know how quickly he's going to save up 25.

[Dave Ramsey]

That is because I do wonder, Alex too, if you got if you paid off the six credit cards and did just the traditional debt snowball, how much payments monthly will be freed up because those are paid off. So even just working down the debt snowball, but knowing you have a freaking $1200 car payment until you get to it to pay off is not fun. But in the meantime, I almost would just work the debt snowball till you get there. But yeah, thanks for the call, Alex. Good luck to you. We learn from our mistakes, George. We learn from our mistakes.

[Alex]

Why refi refinances delinquent private student loans for struggling borrowers? Learn more at yrefy. Com Ramsay.