Dave Ramsey’s “Drive Free” Theory Flawed
GolbGuru from Money, Matter, and More Musings ran the numbers and pointed out a major flaw with Dave Ramsey’s Drive Free, Retire Rich philosophy.
Dave Ramsey says:
You want a brand new sports car that would normally cost you $475 a month. The car you are driving now is worth $1,500.
If you take that $475 and pay yourself instead of paying the dealer, you’ll have $4750 in just ten months. Add that to the $1,500 you can get for your current car, and you can pay cash for a used $6250 car. That’s a major upgrade in car in just 10 months-without owing the bank a dime!
But let’s keep going. If you kept saving at that rate, you’d have another $4750 in another ten months. Chances are, less than a year later, you could sell your $6250 car for about what you paid for it. This means that you can step up again-with-cash-into an excellent $11,000 used car just twenty months from today! Not Bad!
GolbGuru rebuts:
Yeah..not bad…but not feasible either! Especially, this part: “Chances are, less than a year later, you could sell your $6250 car for about what you paid for it.”
Golbguru Said,
January 9, 2007 @ 8:29 pm
Flexo, thanks for mentioning the article and linking to it.
Jesse Said,
February 3, 2007 @ 4:37 pm
We bought a used car for $2,000 below book. A few months later it was totaled (everyone was safe) and the insurance company paid us about $2000 more than we paid for it. I think it is feasible if you’re good at getting a deal. Perhaps Ramsey needs to stress that in his explanation.