Yes, you can own a car while on Medicaid. In most cases, Medicaid excludes one vehicle as a countable asset, regardless of its value, provided it is used for transportation by you or a household member. A second vehicle is typically counted towards your asset limit, though some states have exceptions for older vehicles.
Medicaid also exempts your vehicle when determining financial eligibility. An applicant is allowed to own one car that's not included in your resource limit if it's used for transportation or by another person living in the house, such as a spouse. You also don't have to be the driver of the vehicle.
Because you can convert a vehicle to cash, it can be defined as an asset. Unlike real estate, savings accounts, and other assets that have the potential to increase in value, automobiles are vulnerable to a range of depreciating factors that can cause values to plummet, such as: Odometer miles.
Countable Assets
Any cash, savings, investments and property that exceed these limits are considered “countable” assets and will count towards an applicant's $2,000 resource limit. Keep in mind that states do have some wiggle room when it comes to setting asset limits.
Upon one's death, the state will file a claim against their estate, including one's home, to collect funds for repayment of nursing home care expenses. Not all states use liens as a means of reimbursement for Medicaid funded long-term care. While Estate Recovery is required by all states, liens are not.
Starting January 1, 2024, the asset test to qualify for a Medicare Savings Program was eliminated. This means individuals can have any amount of assets and still qualify for a Medicare Savings Program.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
To make a car an asset, generate income with it (rideshare, delivery, rentals), use it for business to get tax deductions, pay off loans to build equity, choose cars that hold value (used, classic), and maintain it well to slow depreciation, turning it from a drain into a tool or income-producer.
Eligibility rules differ between states. In states that have expanded Medicaid coverage: You can qualify based on your income alone. If your household income is below 133% of the federal poverty level (FPL), you qualify.
Calculate what you can afford
One rule of thumb is to spend no more than 10% of your take-home pay on a monthly car payment. So do the math. If your after-tax pay each month is $3,000, you might be able to afford a $300 car payment.
The best way to finance a car involves getting preapproved from a bank or credit union before visiting the dealership to compare rates, making a significant down payment (15-20% is ideal), keeping loan terms shorter (around 48-60 months), and negotiating the total car price separately from the financing, allowing you to get a lower interest rate and save money long-term. Leasing or other options like PCP/HP exist, but a direct loan with good credit offers the most equity.
Depreciation. Cars reportedly lose 20% of their value in the first year of ownership and retain just 40% of their original value after five years. Clearly, that is not a good investment. “Your goal should be to buy the least expensive car. Period,” said Orman. “That should steer you to a used car rather than a new car. ...
The 50/30/20 rule is a simple budget guideline: 50% of your after-tax income for needs (like housing, groceries, and car payments/expenses), 30% for wants (dining out, entertainment), and 20% for savings and debt repayment. For a car payment, this means your total monthly car expenses (loan, insurance, gas, maintenance) should ideally fit within the 50% "Needs" category, with some experts suggesting car costs shouldn't exceed 10-15% of your income overall, making a modest car a "need" and luxury vehicles a "want".
How Vehicles are Treated Under Medicaid Rules. Generally, one vehicle is considered an exempt asset, regardless of its value. This is typically the primary vehicle used for transportation.
The best way to save your house from Medicaid recovery is to put it into an irrevocable trust. A trust protects the home because the individual no longer owns it.
Medicaid look-back exemptions allow penalty-free asset transfers for specific purposes, including moving assets to a spouse (Community Spouse Resource Allowance), transferring a home to a caregiver child or a sibling with equity, or giving assets to a blind or disabled child, preventing a penalty period for long-term care eligibility, though rules and amounts vary by state. Other strategies involve spending down assets on permissible items like home modifications, paying debt, or creating irrevocable funeral trusts.