Ask Yourself These 4 Questions Before Selling Your Car to Save Money
Everybody struggles financially once in a while. The first and most obvious piece of advice is to pull back on spending and eliminate unnecessary expenses. Sound advice, of course, but what exactly constitutes an unnecessary expense? It’s easy enough to go without fancy coffee and dinners out, but when your finances are already stretched to their limit you may have to consider some more drastic measures.
If you have found yourself in a bad spot financially, you may be frantically Googling advice to help keep things from getting any worse. One piece of advice you may see frequently is the recommendation to sell your car. It’s a drastic step that may be a very real consideration for some people, and it may even be the right step for you to take. However, before you do that, we want you to ask yourself these four questions.
Can I Even Live Without a Vehicle?
The environmentalists among us are always going on about the benefits of public transit. It’s true, taking transit instead of driving to work can save a lot of money, especially if you live and work along the subway line in Toronto and around the Greater Toronto Area. Well, lucky them. What if you’re one of the many people who aren’t in that fortunate position? When you live further away from your job or you work odd shifts, there might not even be an option for public transit to your place of employment. If there is, it can add hours to your daily commute. Ask yourself if it makes sense to sell your car and add ten hours a week to travel to and from your job, or if you might be better off to keep your car and get a part-time, temporary job for a few hours a week to pick up some extra cash.
How Much do I Still Owe on my Car?
If you have an auto financing arrangement in place, it’s more than just the simple math of selling your car, paying off your car loan, cancelling your insurance and walking away. No matter where you have secured a car loan, it’s going to be structured to be paid over the whole term of the loan. That means at any given time, you may owe more on your car than you could reasonably expect to sell it for in the open market. This is called an “upside down” car loan. It could cost you more to pay off your loan than you would make from the sale, and you may still have an interest penalty for the early discharge of your loan. In other words, you could find yourself having to borrow more money from another source to pay off your auto loan. It may lower your monthly expenses, but in the long run it’s a terrible financial decision.
Will I be Better Off Refinancing Instead?
When you have no credit or bad credit, car loans are harder to get than for those with a clean credit history. However, that doesn’t mean you’re branded for life as a poor credit risk. If you did qualify for a car loan with less-than-perfect credit, you may feel like you are asking for too much by requesting new loan terms when you hit the skids financially. Nothing could be further from the truth. Auto financing companies employ people just like you who have had their own financial struggles, and people are naturally inclined to help those in need in whatever way they can. One way you may be able to lessen the pinch of monthly expenses is refinancing your car loan. A small change to the term of your loan could make a big difference to your household budget.
One note of caution: If you’re planning to ask for financial assistance in the form of auto loan refinancing, you are in a MUCH better position to do so while your account is still in good standing. In other words, if you think you are going to have trouble making your car loan payment in the foreseeable future, you are better off doing the work to refinance your car loan before you have further damaged your credit by missing a payment.
How Long is my Current Financial Crisis Expected to Last?
Try not to make a permanent decision based on a temporary condition. Like we said, everyone struggles financially once in a while. If you find yourself in a difficult spot because of something temporary, selling your car to get ahead may prove to be false economy. For example, it’s natural to think when you lose your job that you need to pull back on your finances immediately. Selling your car is certainly one way to do that, but it’s a short-sighted approach. When you’re unemployed, you need to be able to consider all of your possible employment options. If you don’t have a car, you have now just limited yourself to only those open positions that are within a reasonable commuting distance on foot or by transit.
If you do find a new job that’s in a town you can’t reach by transit, you’re going to have to buy a car again, and you can bet your first paycheque that it will cost you more to buy, finance and insure your new vehicle than the one that you just sold a few weeks or months ago. The journey to a healthy bank balance is a marathon, not a sprint. Try to look further ahead to avoid making decisions that only make sense in the moment.
Do you think all of this is a moot point because your bad credit will keep you from getting a car loan in the first place? You may be in for a surprise! Auto Loan Solutions has been helping people just like you get behind the wheel for decades. Try our easy online application form to see what we can do for you. Do you know someone who is thinking of selling their vehicle as a way to get ahead? Share this post with them to ensure they ask all the right questions.
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