Terrence from Atlanta has a funds downside, and he is aware of it.
The Georgia father lately known as in to The Ramsey Present in search of recommendation on how you can do away with his automotive, a 2021 Kia Stinger GT2 that prices him $1,200 a month. He additionally pays $2,000 in little one help each month — a monetary burden that leaves him with little respiration room regardless of incomes a six-figure wage.
“I make $10,000 a month,” Terrence instructed co-hosts Ken Coleman and Dr. John Delony. “I convey house $5,200 after taxes and little one help.”
Terrence purchased the Stinger for about $60,000 — rolling in damaging fairness from a earlier automobile. Two years later and he nonetheless owes $57,000, however the automotive is now solely price about $30,000.
“Oh boy, that’s a shower!” Coleman exclaimed. “That could be a bat proper there.”
Terrence’s scenario isn’t uncommon. Sadly, many People discover themselves “automotive poor” — trapped by excessive month-to-month funds, inflated costs and rates of interest that stretch already-thin budgets.
In accordance with CarEdge, the common value of a brand new automotive within the U.S. hovers round $48,699. In the meantime, Experian experiences the common month-to-month automotive cost for brand new autos sits at $742 as of This autumn 2024.
Rates of interest on auto loans are additionally elevated, with new automotive consumers paying a median of seven.1% in Q1 2025, in accordance with USA At present. All of this has led to People accumulating $1.64 trillion in auto mortgage debt as of Q1 2025, in accordance with Commerce Economics.
These numbers don’t even think about insurance coverage, gasoline or upkeep prices. And with 20% of recent automotive consumers now paying over $1,000 a month, Terrence is amongst a rising cohort of American drivers underwater on their loans.
Learn extra: Need an additional $1,300,000 whenever you retire? Dave Ramsey says this 7-step plan ‘works each single time’ to kill debt, get wealthy in America — and that ‘anybody’ can do it
Terrence’s query for the co-hosts was easy: what’s the quickest, least painful approach out of this case?
To be able to give the co-hosts a whole image of his funds, Terrence stated he usually has between $1,300 and $1,400 remaining each month after paying his little one help and different bills.