Now is a Great Time to Sell a Car

If your household can function with one less car, there has never been a better time to sell.

Because of some pandemic-related issues, manufacturers don’t have all the parts they need to build new cars. With a reduced supply of new cars, the market for used cars has been booming. Used car prices are up more than 45% over the past year.

If you’re eager to reduce your spending, I am going to suggest you look in your garage or driveway. If you bought a car in the past few years, you may be able to sell it for close to what you paid, or maybe even more.

Need v. Want: Time for a Car Review

The car you bought a year or two ago may have very much been a need. But has your life changed? Are you now working remotely, full-time or a few days a week? Or maybe the pandemic has pushed you to rethink your goals, and you’re now eager to look for ways to spend less and save more.

If you take a step back and reassess, is it possible that you don’t need two (or three) cars in your household. Or for those of you with one car, has your lifestyle changed so that you could function just fine without a car?

This can be such a financially liberating move if you are currently paying off a car loan. You very well might be able to sell your car today for at least as much as the remaining balance on the loan. I encourage you to think through for a moment what it would feel like to be rid of that monthly payment.

Sell the Car, Buy More Financial Freedom

The average loan payment for used cars is around $400 a month. If you bought a new car in the past few years, your payment might be $500. If you can now envision functioning without that car, just think of how you could redirect that money.

• Build up your emergency savings. How great would it feel to add $5,000 or so to your savings over the next 12 months?
• Pay down credit card debt. Getting rid of high-rate debt is such a huge win, both financially and emotionally.
• Fully fund a Roth IRA. You do realize that $500 a month is $6,000 a year, which just happens to be the maximum amount anyone under the age of 50 can contribute to a Roth IRA this year. If you were to invest that in a low-cost Total Stock Market index mutual fund or ETF, after 25 years it will be worth around $25,000 assuming a 6% annualized return. (That 6% is actually lower than the long-term average. I am being conservative here.) If you continued to save $6,000 every year, you will have nearly $350,000 ready for retirement at the end of 25 years. If you earned 8% annualized, your IRA will be worth more than $470,000.

The opportunity to sell your car at a high price will likely not last many more months. The pace of production of new cars is expected to pick up soon. When that happens, what you can collect for your used car will likely fall. Now’s the time to use a car sale to help you work on important financial goals.