Why Selling Your Car to Get Rid of Your Loan Payment Might Be Worth It

Image Source: Getty Images

If you're paying a lot for your car loan, you need to read this.

Key Point

• My monthly car loan payments have become very high.
• If you sell your car, you can eliminate the loan payments. This can free up funds to invest and build wealth.
• You might be better off buying a cheap used car that you can buy with cash rather than paying a big loan.

A car is a necessity for many people. Unfortunately, it comes at a huge cost. The average monthly car payment is now over $700. This means that you may be spending a significant portion of your monthly income on transportation expenses.

The opportunity cost of paying off those hefty car loans can be much higher than you think. In fact, just because your car is in your driveway can cost you millions of dollars to miss for the rest of your life.

Doing the math, here's why it's well worth selling your car to eliminate your loan payments.

How Much Does Your Car Really Cost?

You might think that paying for a car is fine if you can keep it within your budget, but the problem is that you have to consider the opportunity cost. Every dollar you spend on your car is money you can't spend on anything else, like saving for your home or investing for your future.

Those dollars you spend on cars won't help build your net worth in the long run. This means that the longer you own it, the more it will depreciate in value, and you won't be able to sell it for a profit (hopefully, unlike stocks you've invested in or houses you've bought, which can often be sold). ). more than you spent).

Opportunity costs really add up. Especially when you have car payments for most of your life. For example, let's say you pay a monthly fee of $700 a month for a car for 30 years. At the end of the process, all that remains is the memory of the car you drove.but instead invested A $700 monthly brokerage account for 30 years with an average annual return of 10% would be over $1.3 million.

When you have the choice between keeping your car or retiring a millionaire, it's easy to see why selling your car to eliminate loan payments is a smart financial move.

Is it really possible to go without paying for a car?

Well, you're probably thinking all this is fine. However, you will need a car to secure your place. So how can I sell it to skip the car loan?

The answer is that you can choose a cheaper used car than paying cash. Let's say he has a car worth $30,000 and he still owes $20,000. Selling the car allows him to buy a cheap used car for $10,000 and eliminate the monthly loan payments.

From now on, you can save a small amount of cash each month toward your next car payment and invest the difference. If you try to drive your car as long as possible, you should be able to easily save money and buy a cheap used car while leaving enough money for your investment.

Also, if you have one, do you really need to have two cars, or can you move somewhere you can walk, work from home, or rent a car ( (and cheap), you can also consider whether you really need a car. For those rare occasions when you need them.

After all, you shouldn't necessarily assume that car payments are a normal, non-negotiable part of life. If you can sell your car to avoid paying the loan, you may be more financially secure in the future.