Personal Finance
I'm a multi-millionaire and am wondering if I should pay off my car - here's what Dave Ramsey thinks
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If you’re a multi-millionaire, write a check and pay off the car, says Dave Ramsey.
Key Points About This Article
- If you have the money, write a check and pay off the car, says Dave Ramsey.
- If you have a car loan, you may be stuck paying principal and interest for years.
- If you can, pay off the car sooner than later, which is going to save you money for other financial goals. If not, try increasing your monthly payments, if you can.
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People always say, “Well, Dave, if I were a millionaire, I’d be able to pay cash for a car too! No, you’re not getting it. These people don’t buy with cash because they’re rich; they’re rich because they buy cars with cash! Think about how much the average American spends on car payments over his lifetime. The average payment is around $716 a month right now. If you invest $716 in a good mutual fund every month from age 25 to 65, you’ll end up with more than $6 million. Now, I love nice cars, but I’ve never seen one worth $6 million!”
Plus, if you have a car loan, you may be stuck paying principal and interest for years.
Tips for Getting Ahead of a Car Loan
If you can, pay off the car sooner than later, which is going to save you money for other financial goals. If not, try increasing your monthly payments, if you can.
And make sure the extra payments are applied to the principal.
Otherwise, it could be used for advance future payments on the car. You’re doing this to not only reduce principal but overall interest if you’re allowed to without penalty.
Also, make sure you don’t refinance your car at any point. Not only will this extend your loan even longer, but you’ll pay even more interest than you have to. Another way to save money on your car is by shopping around for less expensive car insurance. Many people are overpaying for coverage that’s not needed. Shop around.
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