'Ridiculous Expectations': Dave Ramsey Warns Parents To Avoid A Costly Mistake

According to Cox Automotive, the average price of a new car in the U.S. was $47,823, while the average listing price for a used vehicle was $25,361 (as of September 2024). That said, automotive experts consider $10,000 to $25,000 to be a fair range to shoot for when it comes to a first car; this takes into account your budget, how much driving you plan to do, and your financial situation. This said, for a teen, aside from the driving factor, most of them likely have little budget or personal finances to speak of at this stage of their life.

On this matter, though, personal finance expert and radio personality Dave Ramsey says it doesn't have to be so. Ramsey isn't a proponent of parents paying for their teen's first car outright, as he says doing so will only set them up "for a life of ridiculous expectations." Instead, he insists that parents have their teen save for their first car, with parents then matching whatever is saved to help with the vehicle purchase.

Dave Ramsey views the purchase of your teen's first car as an opportunity to learn how to talk to your kids about money and to help them gain financial literacy. For Ramsey, saving money is 80% behavioral and 20% knowledge, so having your teen save for their first car is actually a clever way to form smart-money behaviors. In an October 2024 post shared on the social platform X, Ramsey wrote, "The best thing to do for your kids is have them buy their own cars. ... If you have enough cash set aside, you and your child could agree on a matching plan to help buy the car. Whatever your child saves, you'll match."

According to his blog Ramsey Solutions, smart behaviors around purchasing a car should also include paying for it with cash to avoid the extra thousands of dollars you'll spend on leasing or loan payments. That said, Experian found the average car loan payment in the second quarter of 2024 was $734 per month for new vehicles, and $525 for used vehicles, but the feasibility of paying cash up front for a $10,000 to $25,000 vehicle still may not be realistic for everybody. (Read about the yo-yo financing tactic and how it can cost you.)

As said, Dave Ramsey suggests a better way to help your kid purchase their first car is to match the money they save themselves. Maybe you cover 50% of the cost of the vehicle, which gives your youngster a bit of a break, but still teaches them the value of saving for the things they want while negating the sort of entitlement that could come from having everything paid for them. As Ramsey put it, "When you buy new cars for teenagers, you're setting them up for a life of ridiculous expectations. Think about their future."

Aside from teaching financial management, though, another benefit of having your kids take on the responsibility of helping to pay for their first car is that it can instill a greater sense of gratitude. If you spend your hard-earned money on a vehicle it took you months or years to save for, you're more likely to maintain that vehicle, which can also mean driving it less recklessly. Speaking of which, a clean driving record is one of the simple ways you can save on car insurance, which also presents yet another opportunity to teach young people the financial benefits of responsible driving and prudent budgeting.