Terrence from Atlanta has a budget problem, and he knows it.
The Georgia father recently called in to The Ramsey Show seeking advice on how to get rid of his car, a 2021 Kia Stinger GT2 that costs him $1,200 a month. He also pays $2,000 in child support every month — a financial burden that leaves him with little breathing room despite earning a six-figure salary.
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“I make $10,000 a month,” Terrence told co-hosts Ken Coleman and Dr. John Delony. “I bring home $5,200 after taxes and child support.”
Terrence bought the Stinger for about $60,000 — rolling in negative equity from a previous vehicle. Two years later and he still owes $57,000, but the car is now only worth about $30,000.
“Oh boy, that’s a bath!” Coleman exclaimed. “That is a bat right there.”
America’s auto loan crisis
Terrence’s situation isn’t rare. Unfortunately, many Americans find themselves “car poor” — trapped by high monthly payments, inflated prices and interest rates that stretch already-thin budgets.
According to CarEdge, the average price of a new car in the U.S. hovers around $48,699. Meanwhile, Experian reports the average monthly car payment for new vehicles sits at $742 as of Q4 2024.
Interest rates on auto loans are also elevated, with new car buyers paying an average of 7.1% in Q1 2025, according to USA Today. All of this has led to Americans accumulating $1.64 trillion in auto loan debt as of Q1 2025, according to Trade Economics.
Those numbers don’t even factor in insurance, gas or maintenance costs. And with 20% of new car buyers now paying over $1,000 a month, Terrence is among a growing cohort of American drivers underwater on their loans.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Co-hosts share their advice for Terrence
Terrence’s question for the co-hosts was simple: what’s the fastest, least painful way out of this situation?
In order to give the co-hosts a complete picture of his finances, Terrence said he typically has between $1,300 and $1,400 remaining every month after paying his child support and other expenses.
The co-hosts offered Terrence two potential escape routes. One option is to aggressively pay off the car over a long period of time by throwing $3,000 a month at the debt. However, that route might include some extreme budgeting and maybe even a few overtime shifts for Terrence.
"If you take that $1,200 a month [car] payment, you take that $1,300 extra and you go through your budget with a magnifying glass. You stop going out for a season, and let’s say you can scrounge up $3,000 [per month] that includes this $1,200. You can pay this thing off,“ Deloney said.
The other route calls for Terrence to sell the car now for around $30,000 and buy a reliable used vehicle — like a high-mileage Toyota or a Buick, which Terrence once owned and loved — for about $7,500, and then pay off a big chunk of the auto loan balance with the roughly $22,000 remaining from the sale of the car.
This would leave Terrence with roughly $35,000 left on the auto loan, which means he wouldn’t be out of the woods just yet.
Either way, Terrence is going to have to pull himself up by his boot straps and create a frugal budget in order to get out of this financial hole. Ultimately, the co-hosts applauded Terrence’s honesty and determination to change course.
“I’ve got a daughter who’s about to go to college, so I want to have the money," Terrence said.
Coleman and Delony’s final piece of advice? Ditch the debt, drive a modest car and stay focused on long-term goals.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
