Selling your car can free cash for your other debts, but only if the sale clears the auto loan and whatever replaces the car costs less each month than the car does now. Check both before you list it, then send every freed dollar to your highest-rate debt.
Both checks are easy to skip, because the payment is the number you see every month. It’s only part of what the car costs, though, and it says nothing about what’s still owed on the loan.
So compare full monthly costs. Add up the payment, insurance, gas, maintenance, and parking, then do the same for the car’s replacement, whether that’s a cheaper used car, a transit pass, a bike, or rideshares. Price a realistic month of rides, not your lightest week.
Owning the replacement outright can widen the gap between those totals. A lender typically requires collision and comprehensive coverage, the parts of a policy that pay to fix or replace your own car, for as long as you owe on it. Once the car is yours, that coverage is optional, and dropping it on a car you could afford to replace cuts the premium.
Check the loan first, since it can end the plan before you price anything. Ask your lender for a payoff quote, which adds interest owed through the payoff date and can run higher than your statement balance, and compare it with a private-sale price from Kelley Blue Book or Edmunds. If the payoff is higher, selling leaves you owing money with no car to show for it.
Say an SUV sells for enough to clear its loan with $8,000 left over, and that $8,000 buys a used car outright. The $550 payment disappears, the insurance bill usually shrinks, and even after setting aside more for repairs on an older car, $500 or more a month is free for the cards.
Line up the replacement before you list the car, so you aren’t paying for rideshares or rushing into a pricier purchase while you shop. Once the car sells, schedule an automatic payment to your highest-rate card for the whole monthly savings, so the money reaches the debt before everyday spending absorbs it.
If you can’t name what you’ll drive or ride next and what it costs a month, you’re not ready to sell.
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
