Ashley from Jacksonville, Florida, faces a financial dilemma due to a “horrible, horrible decision,” made by her husband.
On an episode of “The Ramsey Show,” she described how her husband went from a fully paid-off modest car to an expensive electric vehicle (EV) that has changed their financial situation.
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Dave Ramsey couldn’t believe how expensive the car was.
“$72,000 for a Kia!?” he gasped.
'He's not good at this'
Despite having recently paid off his car, Ashley says her husband decided to upgrade to an SUV for $32,000. The dealership then convinced him to trade in his new set of wheels for an electric vehicle he wanted — a KIA EV 6.
“We’re not in a financial place to be able to afford that car,” she said. “He’s currently the only one working.”
Ashley says they still owe $62,000 on the auto loan and the dealership has offered only $40,000 to buy the car back. In other words, the car has negative equity.
Meanwhile, the couple’s monthly car payments are $1,200, which is nearly as much as their rent of $1,500.
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Auto loans and sinking car values are prominent trends. American consumers have raked up $1.61 trillion in auto loan debt as of the fourth quarter of 2023, according to the Federal Reserve Bank of New York.
Meanwhile, electric vehicles have lost value faster than traditional used cars, according to analysis from iSeeCars.com. Used EVs lost 33.7% of their value on average between October 2022 and October 2023.
These trends imply that Ashely’s husband faces a real challenge. However, Ramsey believes bad decisions have exacerbated the issue.
“He’s not good at this,” Ramsey said. “I think your husband called the same dealer that screwed him the first time and asked them what they can give him for it and they thought, ‘Oh, we're going to get this guy again.’”
Ramsey suggested Ashely and her husband sell the car privately. A glance at listing sites by co-host George Kamel at the time revealed the car could sell for around $50,000.
Ramsey recommended Ashely and her husband try to sell the car for $50,000. This would leave $12,000 in negative equity on the auto loan that they must cover. He suggested taking a personal loan to cover the rest.
Fortunately, the couple doesn’t have much debt besides the car loan. Ashley claims their credit card debt is under $2,000. Meanwhile, they have $4,000 to $5,000 in savings and her husband earns $90,000 a year. Ramsey believes this financial situation offers enough flexibility for them to take out a personal loan and buy a cheaper car to get rid of the expensive Kia.
“We'll call that debt ‘stupid tax,’” he said. “Which is what I have to pay when I do something stupid.”
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