Living debt-free can be an empowering way to build financial stability, but some common purchases can make it difficult to get free of debt. Dave Ramsey, a financial advisor and radio personality, encourages consumers to work to quickly pay off their debts and make smart spending decisions to stay within their budget.
According to Dave Ramsey’s advice, you should avoid three common large purchases that are actually expensive mistakes, while other types of purchases are worth the cost.
What Dave Ramsey says to stop buying
Just because certain types of purchases are common doesn’t mean they’re necessarily wise or worth the cost. According to Ramsey, these are three financial mistakes to avoid.
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New cars with loan payments
While many middle-class Americans take out loans to help cover the cost of a new car, Ramsey says this is a mistake. If you’re working to get debt-free, taking out an auto loan will only add to your debt. Plus, new vehicles depreciate in value, so they’re not a smart financial investment.
According to Experian, the average auto loan interest rate for buyers with excellent credit was 5.18% during the first quarter of 2025. That average rate was 15.81% for borrowers with poor credit scores. The interest on an auto loan can make it more difficult to pay off, and can significantly add to the amount that you ultimately pay for your new vehicle.
You’ll also pay more for car insurance when you buy a new vehicle. Since new cars have higher value and are more expensive to repair, car insurance providers charge higher premiums compared to what you would pay to insure an older vehicle of lesser value. Plus, if you finance the new car, most lenders will require you to purchase full coverage insurance until your auto loan is paid off, which will increase your premiums.
Timeshares
Timeshares, where multiple parties split the cost of a vacation property, are a popular vacation option for many. Each timeshare owner is guaranteed the option to spend time at the property, but Ramsey is quick to point out that when you invest in a timeshare, you don’t actually own the property, so there’s no investment value.
There are other problems, too. Timeshares are expensive, and if you don’t have the money to pay the full price upfront, interest fees and loans will add to your debt and the overall cost. In addition to the purchase price, you’ll be responsible for many fees, including annual dues, maintenance fees and utilities. Timeshares are difficult to get out of, too.
Extended warranties
Extended warranties, where you purchase extra coverage on an item like a car or appliance, may seem like a wise investment, but Ramsey says they’re just not worth it. The chances of you having to use the extended warranty are low, otherwise it wouldn’t make financial sense for the company to offer the warranties.
Extended warranty coverage is also limited, so you might find the cost you paid for the warranty doesn’t even give you the coverage you need. Plus, extended warranty costs can quickly add up if you buy them often.
What Dave Ramsey says is worth the money
While Ramsey is against common middle-class spending habits like buying new cars with loans, there are a few large purchases that he says are worth the money.
Budgeted home repairs and maintenance
Ramsey says that neglecting basic home upkeep can cost you more in the long run. It makes sense to spend on preventive home maintenance as long as you incorporate those costs into your budget and don’t take out loans or put the expenses on a credit card.
Replacing a roof or fixing your furnace might not be the most exciting way to spend your money, but it can pay off by preventing damage and larger repairs to your home that you could otherwise face later on.
Used cars purchased entirely with cash
Rather than take out an auto loan to buy a new car, Ramsey recommends buying a used vehicle that you can purchase entirely with cash. Used cars have already taken a depreciation hit, and you can avoid high interest rates and high initial car insurance costs by buying used.
If you’re worried about a used vehicle potentially needing repairs, try to arrange to take it to a mechanic for a pre-purchase evaluation to identify any issues. Certified pre-owned cars are another option; these vehicles have undergone examinations and come with some warranties, but they’re still more affordable than brand-new vehicles.
The bottom line on spending smarter
This Dave Ramsey advice can help you live debt-free. Common spending habits like financing new vehicles may be socially accepted and seen as normal, but they can actually sabotage your financial goals.
Rethinking your spending habits, especially when it comes to these big purchases, can help protect your long-term financial security and set you on the path to getting and staying debt-free.
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