The Rachel Cruze Show - This Industry Wants You Trapped (Don’t Fall for It!)

Episode Date: February 25, 2026

🚗 Check out the Ramsey Car Guide!   In today’s episode, I’m reacting to a video all about the shady things car salesmen do to trap people with car loans. I’ll also share the best way to buy a car and avoid the car loan trap altogether. Next Steps:  🎥 Watch my video 5 Home Upgrades That Pay You Back (and 4 to Skip!). 💻 Crunch your numbers with the Investment Calculator! 📈Are you on track with the Baby Steps? Get a free personalized plan. 💵 Start your free budget today. Download the EveryDollar app!   Connect With Our Sponsors: Learn more about Christian Healthcare Ministries. Get 20% off when you join DeleteMe. Go to FAIRWINDS Credit Union for an exclusive account bundle!   Explore More From Ramsey Network: 🍸 Smart Money Happy Hour 🎙️ The Ramsey Show  💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💰 George Kamel 🪑 Front Row Seat with Ken Coleman 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

I recently saw a video about the shady things that car salesmen do to trap people into car loans, and it has over a million views, which tells me this is probably a pain point for people. So we're going to watch it, and I'm going to give you some of my takes on the tricks that he's exposing, which I so appreciate this. All right, before we get into it, make sure to like, subscribe, and share the episode with a friend. Okay, so let's first take a look at how he explains the car payment cycle and the cost breakdown. Here it is. So once the salesman gets you on the hook, he takes you back to his desk to talk numbers.

As we all know, this can be an annoying back-and-forth process where you tell the salesman how much you want to spend. They run to their manager in the back. They yap about basically nothing because they already know what their price is going to be. Then the salesman comes back to you, provides you the new numbers, and this goes on and on until you agree on a price. Now, if you're not paying cash, this is where the greatest trick comes into play, the monthly

payment. For some reason, our simple little brains are only concerned about short-term pain, and we will everything we can to avoid it. This includes spreading out the cost of an item over a certain number of months to avoid paying the full amount today. This is the same thing as the buy now pay later programs I mentioned in this video, but with a car, it can get even worse. Let me show you the car math that schools never teach you, but dealerships know completely by heart. A new car loses roughly 20% of its value in the first year, another 15% in year two, and 10% more in year three. Meanwhile, on an 84-month loan, you're only paying about 12% per year.

towards the amount you owe. The rest is all interest. This creates an equity gap that leaves most buyers owing $7 to $10,000 more than their car's worth by year three, which is why nearly one in four trade-ins involve negative equity from the previous car. Basically, people are stuck in a debt spiral with no real way out. So let's look at an example. This is a 2025 BMW3 series that's listed for $50,000. If you were to put down 10%, which is pretty standard for auto loans, you would pay $5,000 today. Which means your loan will be worth $45,000, which sounds somewhat reasonable. Your salesman will then suggest a 72-month loan, and assuming the 7.5% APR we're currently seeing in the market, your monthly payment will set at about

$780, not including taxes and other fees. So for $5,000 today and $780 per month for the next six years, you two can drive off the lot with a brand new BMW. Only problem is you're not actually signed up to pay $45,000 over the next six years. In fact, if you pay your loan off over the next six years without missing a single payment, you will end up paying $56,160, which is over $10,000 more than the original loan amount. And if you show any signs of resistance, the salesman might even lure you in with a lower monthly payment by extending the term of the lease to 84 months. So now, you only pay $690 per month. But your total amount then comes out to $62,960 if you include your down payment. And the truth is, that BMW you drove off the lot just dropped 10% of its value.

and it will never be worth $62,000. Man, so you see that. You see already how they're financially winning, right? Car companies, they know how to make money, and that is why they love, love when you finance a car. So if you go in and pay cash for a car, they're not as excited because they're not going to make as much money. So there is something so powerful about that knowledge

of just knowing, hey, this is how it works. And to remember when you go into debt and you're paying that interest, you end up paying so much more for an item than what the original price was. and then something like a car that goes down in value makes it not a smart financial move. Now, a home, on the other hand, for instance, right, you take out a mortgage, yes,

you're going to be paying more at the end of that 15-year note or the 30-year mortgage. Hopefully you pay it off sooner than that. But at least your home has gone up in value over time versus a car absolutely plummeting. So, all right, let's look then at the three tricks that are commonly used in the car buying world. You see, dealers have mastered the art of such.

psychological manipulation and they like to use three main tricks. The first is referred to as the four square method, where they will intentionally confuse you by juggling four variables at once. Purchase price, down payment, monthly payment, and trade in value. All designed to make you pay more and not really realize what's going on. They will write in big letters, scratch things out, flip the paper over, and write over previous numbers pretty much just to wear you down and make you sign. The second trick they use is called the time pressure closed, which is the art of making

the deal you're being presented is only going to last for so long. They might even say that the deal is only available today or that they have someone coming in this afternoon to look at the same car. All in the hopes that they will pressure you into making a decision in order to not lose out to someone else. And finally, the third trick they use is focusing all of your attention on the monthly payment. By steering the conversation away from the total price and towards the monthly payment, they're able to hide thousands in extra costs.

For example, they can raise the price of the vehicle but lower the monthly payment. by stretching the loan from three years to six years. By only focusing on the monthly payment, they're hoping that you don't realize that you just went from a 36-month payoff period to 72 months. All they want you to know is that your monthly payment went down by $100.

Oh, y'all. And as you listen to them, you're like, yep, that's exactly right, right? I mean, there's the confusion side, right, where they're jumbling these numbers, and you don't want to look stupid, right? So you're just like, okay, and you kind of follow along. And that people do this even when they're doing, like, with investing or something,

they're talking to a financial planner and the financial planner starts talking all these numbers and stuff, you know, the biggest mistake people make is they just kind of clam up and they're just like, okay, whatever you say, so no, wherever you are, wherever you're putting your money, whether you are buying a car, to, if you're investing, ask questions. If you don't understand, ask questions. Yes, number two, the urgency that they put on you, absolutely. This is like a tactic that a lot of industries use where they're like, hey, you got to do it now, got to do it now, because it does cause the sense of and you're more likely to do it if you feel like you're going to lose out on a deal. But the truth is, there'll be a deal the next day, right? There's always a different car or always a

different situation. And then lastly, yes, when you're looking at that monthly payment, you feel like you're getting a great deal. But as he said earlier, which is true, this is math. Even if the payment lowers, that means you're going to be in debt longer, continuing to be paying more and more because of interest. So, can we just as a culture just stop normalizing car payments? Like, this is what people, they get into this cycle and they really do have this belief that you can't have a car without a car payment, just like with student loans. You can't go to college without a student loan. So if we can break this cycle, it is so powerful because it's so on your side, you winning financially. All right, before I get into more of this, I do want to tell you about another part of your budget where you can save money, and that's medical costs.

Christian Health Care Ministries is a biblical community-based way that Christians share each other's medical bills. It's not insurance, which means no network restrictions, no enrollment deadlines, and more flexibility. And that's huge if you are self-employed or between jobs. Families who use CHM often save hundreds of dollars a month, and that kind of margin gives you breathing room while you're working the baby steps. Or you can save for that car we were talking about. All right, to learn more, go to CHministries.org slash budgets. Now another way to stay on track financially this year is having a bank that aligns with your values.

like Fairwind's Credit Union. Their smart checking and savings accounts help you build better money habits and motivate you to save more. And I love that they created the B-WIRD debit card for their Ramsey customers because it's just a daily reminder that you are managing your money differently.

So if you're ready to be intentional, make real progress with your savings this year, visit fairwins.org slash Ramsey today. The average car payment now for a new car is $748. And as the video shows, The industry is set up to trap you into paying even more for that over time because, again, your car is going down in value. And a new car loses 60% of its value in the first five years.

So that is what is wild. So the math is not mathing when it comes to car loans. And here's what's crazy. We said the average car payment for a new car is $748. Well, let's just take that down. Let's say it's $500. And let's say you're 30 years old. And instead of not having a car payment, not going and getting a new car and getting into that whole cycle,

what if you never got a car payment? You saved up paid cash for your car, even if it's a crappy car. You own it, it's yours. You're not paying payments on it. So instead, what if you paid yourself $500 and you invested every single month from 30 to 67, at 10% rate of return $500? That's $2.3 million, y'all. $2.3 million.

Now, that would go up if it was $748, right? It would go up if you were younger than that. Like, that is what's wild. Literally millions of dollars. is you're saying no to to say yes to a car payment. So it is not worth it, y'all. It is not worth it. So make sure, again, that you are making decisions that is best for you in your financial future, and not just looking good in the moment and feeling good about it and making a car dealer happy. That's not the goal. So how do you keep yourself from falling in that trap? Well, again,

I want you to save up and pay cash for a car. And again, it may not be a great car at the moment, but that's okay because the great thing is you can save up on the side, even if you're not investing, like what we just talked about, and you can step up in car. Even that $500, you guys, isn't that crazy to think that if you saved up $500 for four months, that's two grand. And say your car is worth $5,000, you sell it, you can get to a $7,000 car in just four months. Like you can slowly work your way up. So if you're wanting to speed up your savings for that car, you can cut unnecessary expenses from your budget, you can sell something, you can pick up a short-term side hustle if you need to. And listen, I know being.

patient and saving up for a car isn't that instant high that you would get if you were buying a car at a dealership, just like on a whim. But I'm telling you, it puts you in control. It is so powerful. And when you finally buy a car with cash, it feels so good because it's yours. Now, without the car payment, without the stress, it frees you up. And there is something so amazing about that. So if you need some tools in your pocket to help you with this process, make sure to check out every dollar. It's an amazing budgeting app because it's going to help you actually put a line item in your budget to be saving up for a car. And also check out the Ramsey car guide. I'll leave a link down below for that because getting information and understanding all of this is so key. Now, cars are a big

thing, but also houses. So if you want to check out my episode, five upgrades that are worth it when it comes to your home, click right here. Or I'll leave a link below if you're listening on podcast. All right, you guys remember to take control of your money and create a life you love.