Car buying vs. leasing

The Money Guy Show’s 20/3/8 Rule: at least 20% down, loan term of 3 years or less, and total monthly car payment(s) at 8% of gross income or less. Luxury vehicles must be paid in cash or paid off within a year. The rule is designed so the monthly amount you invest always exceeds the monthly car payment.

The cited car-buying-tips page frames Ramsey’s rule as: figure out your budget, always pay cash to avoid debt on a depreciating asset, buy used rather than new because new cars lose value the moment they leave the lot, and do the homework — know the car’s value, get it inspected, test drive it, and negotiate on facts. Financing is treated as one of the fastest wealth destroyers on the Baby Steps path.

Ramit’s current published rule caps all-in car costs (payment, insurance, gas, fees) at 15% of post-tax income and pushes readers to buy and hold for 7–10 years. Leasing is “almost always a terrible idea.” Used cars beat new because new vehicles depreciate 10%+ in the first month; CPO is the acceptable middle-ground. Framing is total cost of ownership, not monthly payment.