A lot of people believe that selling their car can help them save money. Maybe you could use the money to pay off debt or just free up cash for other things. Maybe just using a rideshare program like Uber or Lyft would be easier? There are a lot of hidden costs you should take into consideration before making a decision.
1. Calculate your true cost of ownership
Everyone seems to forget there’s a lot more than just your car payment that goes out the door when you have a car. Don’t forget to add these up:
Once you’ve added these up, you’re in a better position to have a good baseline.
2. Determine what your car is worth
Look at some of the well known websites and companies to get a good feel for what your car may be worth (Kelly Blue Book, True Car, Autotrader, Edmunds, etc.). Don’t forget that there are 2 sweet spots for car depreciation. A brand new car loses the most value after year 1 and year 5. So, if you’re selling a car that’s between 2 and 4 years old, you’ll get to recoup as much value as possible. Also, keep in mind that trading in your car at a dealer is typically not the best route to sell your car. They need to make a profit on it, so they’re going to low ball you.
3. Review your autoloan
If you financed your car, double check to see what the pay off amount is. If the value of the car is less than the value of the pay off statement, then you’re in a position known as “under water”. Our suggestion is to keep paying off the car until you own it outright. If you want to reduce your car payment and save interest on your loan, refinancing may be right for you. If your credit score has improved and rates have gone down or if you’ve paid a significant amount of your car off, consider a refinance option.
4. Look at maintenance and reliability on consumer reports, use AutoZone
There’s really no way to determine how much you’re going to spend on maintenance, but consumer reports can give you some general guidance. They report on car reliability and you can use that as a guide. We suggest to regularly change your oil, keep your car clean, and check your tires regularly. If your check engine light comes on, DON’T WAIT. Go to your local Auto Zone and get their free ODB car diagnostic scan tool. You can utilize it to see what is going on with your car and if it’s a simple fix, maybe do it yourself.
5. Consider your lifestyle
How nice is it to just jump on your phone, click a few buttons, and within minutes a car comes to take you to your destination. But, if you’re driving every day to work and the commute is far, those costs with Uber or Lyft will add up quickly. If you’re driving isn’t every day and your commutes are typically shorter, it could make sense for you.
Great Example
My wife and I had 2 cars for years. I drove to work every day and she was a stay at home mom. We noticed that we hardly put any miles on her car while the miles on my car were pretty high. We considered just selling her car, but she loved the convenience of having it in our garage and she didn’t feel comfortable getting a ride from a “random” person when she needed one. Luckily for us, interest rates had gone down and our credit scores improved significantly from when we originally bought the car. Refinancing allowed us to keep her car and get a lower monthly payment.