Car Loan, Car Loans, Credit Card, Emergency Fund, Roth IRA
November 18, 2021
Right now is an especially great time to sell a car. And for those of you whose lifestyle has shifted during the pandemic—working from home more, for example—getting rid of one car, or going car-less can be a fantastic way to build financial security.
Why now is a great time to sell a car
As you’ve likely heard, the supply of new cars isn’t keeping up with demand. Pandemic-related slowdowns in manufacturing and shipping bottlenecks means car makers don’t have the materials and parts they need to roll more new cars off the assembly line.
That’s created crazy demand for used cars. According to government data, the price of used cars is up nearly 45% since the pandemic started.
It is unheard of to be able to sell a car for more than you paid. At least until now. The manufacturing squeeze caused by the pandemic means that many of you who bought a new or used car in the past few years could sell it for more than you paid, or what you’ve got left in car loan payments.
Pandemic fallout: Do you need that car?
At the same time, I know many of you are living differently than you did pre-pandemic. Working from home has become more common. If you’re not going to the office, or just going once or twice a week, could your household still function smoothly with one less car?
And for those of you with just one car, who live in an urban area with good transportation options, I challenge you to consider if you need that car. If you’re holding on to the car for big grocery runs, what about using the delivery service? Want to shop in person? You can still do that, and many places will deliver to your home. Or you can use a rideshare or taxi. Like to get away once or twice a month? Okay, rent a car.
The bonus from selling a car today
If you can now sell at a price that will at least cover the remaining balance on your loan, imagine what you could do with the savings. If you no longer have a $300, $400, or $500 car payment, what could you do with that money?
If you have any unpaid credit card balances, you’ve just created your own means to turbocharge getting that high-rate balance paid off. Or you can build a $3,600 emergency savings account in just one year if you shed a $300 monthly payment. If you are able to contribute $500 a month to a Roth IRA that’s $6,000 in one year.
And that’s just from getting rid of a car payment. Reducing or eliminating your auto insurance will also be a big savings, as well as not having to pay annual registration and maintenance costs.
I think many of you who think this through will find that even after budgeting for more ride shares and the occasional rental, you will still come out way ahead.
Credit & Debt, Saving, Investing, Retirement