I’m 21 and Being Pressured To Finance a Car

Summary

Summary of "I’m 21 and Being Pressured To Finance a Car" - The Ramsey Show Highlights

Release Date: March 6, 2025

In this episode of The Ramsey Show Highlights, the focus is on financial decision-making for young adults, particularly the dilemma of financing a car versus purchasing it outright with cash. Noah, a 21-year-old listener, reaches out to seek advice on this pressing matter. The discussion features insights from Dave Ramsey and George Kamel, addressing the pros and cons of taking a car loan at a young age.

---

Caller Introduction: Noah's Dilemma [00:09]

Noah initiates the conversation by outlining his current financial situation:

• Age & Experience: At 21, Noah admits to having limited knowledge about finance.
• Current Arrangement: He shares a vehicle with his mother and aims to save for his own car in the next couple of years.
• Financial Goal: Plans to purchase a car projected to have a resale value of approximately $15,000.
• Parental Advice: His parents suggest taking out a loan for the car instead of paying cash upfront. They argue that the interest saved could potentially be invested in the stock market to yield higher returns.

Notable Quote:

“If I have the cash and if it doesn't swap my net worth, then I don't see why I shouldn't just pay up front for it.”
— Noah [00:09]

---

Host's Initial Response: Weighing the Options [01:12 - 02:10]

Dave Ramsey acknowledges his understanding of Noah's parents' perspective, which revolves around leveraging money in the stock market rather than committing it to a depreciating asset like a car.

George Kamel delves deeper into the financial implications:

• Interest vs. Returns: While a car loan at 7% might be manageable, the return on investments is unpredictable. For instance, his own investments faced a 17% decline last year.
• Depreciation Factor: Cars lose value daily, meaning that financing a car results in paying interest on an asset that consistently decreases in value.
• Market Volatility: The stock market doesn't guarantee returns, making the strategy of using borrowed money for investment risky.

Notable Quotes:

“There's no guarantees in the stock market... cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it.”
— Dave Ramsey [02:10]

“If you get a car at 7%, maybe you can put it in the market and get 8%. But that evaluation doesn't take into consideration that the value of that car goes down every day.”
— George Kamel [01:20]

---

Debate on Financial Strategy [02:10 - 04:26]

The conversation intensifies as Noah reflects on his parents' contradictory approaches to car financing:

• Past vs. Present: Noah's father previously took out a loan for a car but opted to pay cash for a recent purchase, leading to confusion about the best approach.

Dave Ramsey criticizes the decision to pay cash, suggesting it was a missed opportunity to leverage funds in the stock market.

George Kamel and Dave Ramsey emphasize the importance of understanding personal financial goals over following parental advice that may not align with one's financial strategy.

Notable Quote:

“It's okay to be misaligned with your parents.”
— Dave Ramsey [04:14]

---

Advice on Financial Independence [04:26 - 07:15]

The hosts transition to advising Noah on achieving financial independence and maturity:

• Savings Plan: Dave Ramsey suggests accelerating the savings plan to purchase the car within a year by saving approximately $1,000 monthly, rather than the two-year plan Noah initially considered.
• Living Independently: Encouraging Noah to move out and live on his own or with roommates to gain financial and personal independence.
• Emotional Growth: Emphasizes that moving out fosters maturity and prepares individuals for future responsibilities, including marriage.

Notable Quotes:

“The longer you're tethered to mom's vehicle... growth is stunted.”
— Dave Ramsey [06:20]

“Even if you get three roommates, you grow up fast when you're living with three dudes.”
— Dave Ramsey [06:40]

“It's going to really help you financially, spiritually, emotionally, mentally to move on and do your own thing sooner rather than later.”
— Dave Ramsey [06:54]

---

Navigating Parental Relationships [07:15 - 09:11]

The discussion broadens to address the general challenge of balancing personal financial decisions with parental expectations:

• Cultural Pressures: George Kamel remarks on societal tendencies to create divisions over disagreements, advocating for peaceful coexistence despite differing financial philosophies.
• Respecting Intentions: Acknowledges that parents often have the best intentions but might not always align with the individual's path.
• Following Intuition: Encourages trusting one's instincts when making financial decisions, even if it means disagreeing with loved ones.

Notable Quotes:

“People like your parents, most of the time there are evil actors out there and there's morons out there. Most of the time a mom and her dad sits down and well intentioned, gives their kid what they think is the next best right step for them.”
— George Kamel [07:33]

“Follow your guts, man. It's just the wrong move.”
— George Kamel [08:54]

“Apparently multiple. This is plural. Guts.”
— Dave Ramsey [09:01]

---

Conclusion: Empowering Financial Choices [09:11 - End]

The episode wraps up with reaffirmations of individual financial empowerment and the importance of making informed decisions that align with personal goals and instincts.

Dave Ramsey and George Kamel reinforce the message that while parental advice is valuable, ultimately, Noah must make choices that best suit his financial well-being and personal growth.

Final Notable Quote:

“Good gut instincts, brother. You're on your way.”
— George Kamel [07:12]

---

Key Takeaways

1. Understand Depreciation: When considering financing a car, recognize that the asset will lose value over time, making interest payments financially burdensome.
2. Evaluate Investment Risks: Relying on stock market returns to offset loan interest is risky due to market volatility and unpredictable returns.
3. Prioritize Financial Independence: Moving out and managing finances independently can foster personal growth and financial responsibility.
4. Trust Your Instincts: Personal financial decisions should align with individual goals and comfort levels, even if they differ from parental advice.
5. Effective Communication: Navigating financial disagreements with loved ones requires respectful dialogue and understanding differing perspectives.

This episode serves as a valuable resource for young adults grappling with financial decisions, emphasizing the importance of informed choices, independence, and personal growth in building a sound financial future.

Transcript

[Dave Ramsey]

Brought to you by Y Refi. Refinance your defaulted private student loans [e-mail].

[Noah]

Ramsey so I'm 21 years old. I know pretty much next to nothing about finance. And right now, currently, I'm sharing a vehicle with my mother. And over the next couple years, I'd like to sock away some cash in buying my own car. And the car I want to buy will be worth a resale value of roughly 15,000 by the time I want to buy it. My parents suggest that I take out a loan on this car instead of paying up front with cash, which, I mean, I've been listening to the show for a little bit, but even just on my Basic instinct doesn't really seem totally right. I mean, if I have the cash and if it doesn't swap my net worth, then I don't see why I shouldn't just pay up front for it. And basically, their argument to why I should do this is they claim that the interest that I'd be paying on the car loan would be less than the interest that I would gain through some sort of stock market portfolio with the rest of the cash.

[Dave Ramsey]

Got it. So they're saying, hey, you could leverage that money in the stock market instead of sinking it into a car.

[Noah]

Yeah.

[George Kamel]

So I'm wondering, George is the finance guy. George. George knows way more about numbers and money than I do. My first response to that is maybe, right. So maybe like just. Just number for number. So if you get a car at 7%, maybe you can put it in the market and get 8%. So maybe. But that evaluation doesn't take into consideration that the value of that car goes down every day. And so it doesn't factor depreciation. So you're paying money back on something that's worth less and less every single day. Do you know what I'm saying? So you're. You're trading one thing for another. But if you don't factor in the depreciation cost of that. Of that used car, then you're not taking in the entire financial picture.

[Noah]

Right.

[Dave Ramsey]

And there are no guarantees in the stock market. And I don't know what they're invested in and what's going on in Canada. But I'll tell you, here in the US we don't know what the future holds. And there's a guaranteed return when you pay cash for that car instead of going, all right, I spent 15 grand, and in the end I paid 20 with interest, and now the car is only worth 10 by the time I pay it off. That's the reality of, of the math of how cars work. And therefore cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it.

[George Kamel]

And your, your, the market return may be lower like year. So I think a couple years ago, I'm, I'm trying to remember off top of my head, but I think my whole thing went down 17% last year. It was up 24% or something like that. That's cool if I'm looking at a 50 year play, right? Or if I've got this stuff in the market for 30 years, if I'm holding a four year car note, that's horrifying because the one consistent that, that never changes is that car payment is due every month no matter what you I'm saying. So I, it sounds to me, tell me if I'm wrong, your parents just want to stop sharing a car with you.

[Noah]

I mean, it's kind of just the car was actually my idea, like the save for my own car. It's just the car we're sharing, or at least the one I'm sharing with my mother is quite old. And you know, by the time I'd be getting this other car, that car will probably be about 20 or so years old.

[Dave Ramsey]

So why did she pay off her car? Did they pay cash for theirs?

[Noah]

I actually don't know.

[Dave Ramsey]

Might be something to ask them. If it's such a good idea, why aren't they doing it? They should be taking out as many car loans as they can get and putting into the stock market, beating the market.

[Noah]

Right. I know that the car that my father bought when I was very young, I know he took out a loan on that one. But the most recent one he bought, he paid fully cash for.

[Dave Ramsey]

Yeah, what a dumb idea that was. He could have been leveraging that in the stock market. Noah, do you see where I'm going with this? It's okay to be misaligned with your parents.

[Noah]

Why? I'm confused.

[George Kamel]

Yeah, don't be confused. Here's this. Your mom and dad have whatever algorithm they've worked out. They think it's the best and they're probably trying to love you in the best way they know how. It's all good.

[Dave Ramsey]

They're not bad people.

[George Kamel]

They're not bad people. The reality is the best thing I can tell you is at my house, in George Camel's house, in Dave's house, and our, in Jake's, like we write a check for cars almost always, unless You're Dave, almost always used cars, and it gives you.

[Dave Ramsey]

If it gives you any solace. I still disagree with my father to this day, anytime we talk about money. So this is just a thing of life you're gonna have to get used to.

[George Kamel]

Me and my father do not talk about money anymore.

[Dave Ramsey]

We just laugh it off and go, thanks, dad. I'm good. I'm good. Yeah, but the. The truth is, Noah, you're. You can do this on your own. And you're a grown man who probably will soon move out and have his own life. Right, of course. And they don't pay your bills, and so they're not going to get a vote in your financial choices. And so you got to do what is in your gut is the best thing for your financial future. And, you know, too much to go into debt at this point. And so the next goal is how do I save up really quickly to get a car I can afford in cash? How long will that take?

[George Kamel]

Okay, it's gonna take you about two years, you said.

[Noah]

Oh, you were actually asking. Oh, yeah. It'll take about. About two years. Yeah.

[Dave Ramsey]

Are you living at home?

[Noah]

If I. Yeah, I am.

[Dave Ramsey]

What do you make a year?

[Noah]

I could sit per year. I'm not totally sure. I mean, I'm about to be hired for a landscaping company that pays about 22 per hour, which is roughly, I guess, 5,200 per month before taxes and pension deductions and all that.

[George Kamel]

So you could have a car in five months?

[Dave Ramsey]

Yeah. I don't like this two year plan where you're saving up, you know, 5, 600 bucks a month. You should be able to save up, you know, a grand a month and knock this thing out within a year.

[Noah]

No, absolutely, I guess. I mean, yeah, you're absolutely right. I guess I'm just not too much of in a rush to get a whole separate vehicle, you know what I mean? I guess.

[Dave Ramsey]

Well, the longer you're tethered to mom's vehicle, the longer this is going to get played out where you're just intertwined with family finances. I'd love to see out on your own. And that's going to give you a sense of independence, maturity, and I've just seen it too often where growth is stunted, when you stay at home for too long, when you don't need to.

[Noah]

You're right.

[Dave Ramsey]

Even if you get three roommates, you grow up fast when you're living with three dudes. All right, you start to learn some things and it prepares you for marriage.

[George Kamel]

And it boosts your immune system too. Because a house full of guys is disgusting.

[Noah]

Absolutely.

[George Kamel]

Just kind of as a general, I'll.

[Dave Ramsey]

Tell you, my, my mom was just in town, Noah. I revert to a child, right? She's like, no, I'll get the dishes, I'll fold the laund laundry. There's just a piece of you that turns into a child when mommy and daddy are there. And so I think it's going to really help you financially, spiritually, emotionally, mentally to move on and do your own thing sooner rather than later.

[Noah]

I agree.

[George Kamel]

But good gut instincts, brother. You're on your way.

[Dave Ramsey]

I love it.

[George Kamel]

It's awesome.

[Dave Ramsey]

That's big. So, John, this comes up a lot. There's a rub between there's a thing this other person believes and they're projecting it onto me and I love this person, I respect this person. And it's easy to say, well, just have a boundaries conversation and tell them to kick rocks and pound sand. But the reality is these are your parents, these are your loved ones, Right?

[George Kamel]

Can I tell you what I think? So what's happening? Our culture has told us if you have a disagreement with someone, you have to hate them. If somebody believes strongly about debt and you believe strongly about borrowing money, then inherently we have to hate each other. If you vote differently, if you want to go to this church and I want to go to this church, we have to hate each other. And it's so nonsense. The whole, I know he's from Toronto, the whole American exchange, the whole idea of the United States is you believe this, I believe this, and we're going to figure out a way that we can both live together, move forward. So, man, people like your parents, most of the time there are evil actors out there and there's morons out there. Most of the time a mom and her dad sits down and well intentioned, gives their kid what they think is the next best right step for them, period. So you don't have to hate them and you don't have to do everything that they say all the time. Especially when you're a grown up now, if you're 22 and you still live in mommy's house and you're borrowing mommy's car, then you're going to do what mommy says. And if mommy says be home at 10:30 at night, because I'm uncomfortable with those, what's going on out on these streets because I watch tons of news, then you have a choice. Be home at 10:30 or move out. Right? But that's the world we're in. So, golly, dude, if you can make peace with people who just have different thoughts than you and then go do. What's the next right move? Especially. I love what he said. My guts are telling me this is the wrong thing. Follow your guts, man. It's just the wrong move.

[Dave Ramsey]

Apparently. Multiple. This is plural. Guts.

[George Kamel]

Yeah.

[Dave Ramsey]

I thought you had one. But I love that John has multiple. That's the kind of man he is.

[George Kamel]

Yeah. And he's got biology and science.

[Dave Ramsey]

Hashtag microbiome. We'll look into that later. Why Refi Refinances Delinquent private student loans for struggling borrowers. Learn more at Y r e f y.com Ramsey.