Auto loan crisis
By the fourth quarter of 2023, Americans’ auto-debt load had drawn equal to the country’s total outstanding student loan debt, which is also at around $1.6 trillion, according to the Fed’s most recent data.
As of December, the average car loan had an interest rate of 9.6% while the average monthly payment was roughly $770, according to data from Cox Automotive. Put simply, Americans are sitting on a vast and expensive pile of auto debt.
Kristen was in a deeper hole than her peers. Her monthly payments were just over $946 — significantly higher than average. She also owed money on the RV that her new truck is meant to tow around. Not to mention rent on the space to park the truck and RV. Altogether, she said, her monthly payments are $2,100.
The truck and RV were worth more than half her household annual income of $121,000.
Despite the eye-watering monthly payments, Kristen was convinced living in an RV is better and cheaper than renting. The co-hosts at The Ramsey Show were not so sure.
Read more: Thanks to Jeff Bezos, you can now cash in on prime real estate — without the headache of being a landlord. Here's how
Kiss your credit card debt goodbye
Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.
Explore better rates‘Rent is not debt’
Kristen insisted she and her husband were making the savviest move possible, but the reality is renting would have been a better choice for the family. As of December, the median rent in Houston is $1,550, according to Zumper.
Not only would renting be cheaper, it could also eliminate another drag on Kristen's finances: a depreciating asset. New cars lose their value at an accelerated pace, and most buyers should expect their vehicle to depreciate roughly 20% by the end of the first year, according to Kelley Blue Book.
“Renting doesn't feel good,” said Warshaw. “It feels like we're throwing money down a black hole … [but] it would have been better for you to rent because rent is not debt.”
The co-hosts recommended she sell her RV and truck and rent for a while before considering a move onto the property ladder.
What to read next
- A Pennsylvania trio bought a $100K abandoned school and turned it into a 31-unit apartment — but here's a much simpler way to earn real estate riches without a mountain of red tape
- Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here’s how you can save yourself as much as $820 annually in minutes (it's 100% free)
- Even your credit card interest is accumulating interest as you read this — stop this 'bad compounding' today by paying off your card fast and saving thousands in interest. Here's how
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