Lesson 25
Let’s Do This: Getting Rid of Your Car
Selling your car will be the last hassle of car ownership you’ll ever have to deal with. By following the six steps in this lesson you’ll get rid of your car and be on the path to financial freedom. If you lease your car, don’t worry; there is a way out of that, too.
Now is a great time to be selling a car. Used car prices have been high since the pandemic, and they remain high. There are many reasons for this, one of which is car dealers are low on inventory. So they’ll be happy to make you a fair offer. This drives up used car prices across the board.
Six Simple Steps to Selling a Car
Determine your car’s value. First, visit the Kelley Blue Book website at kbb.com. If you know your car’s mileage, exact model, engine type, and options, kbb.com will tell you what it’s worth.
Two other good websites for establishing your car’s value are Edmunds.com and Carmax.com. You should also check local used car dealers’ websites to see what dealers are asking for similar cars in your area.
Run an ad. I suggest listing your car online. Websites for selling your car include AutoTrader.com, Cars.com, CarsDirect.com, and Motors.eBay.com. The benefit of online listings is that you can include multiple digital pictures of your car. This is a big advantage.
Set the appointment. The primary purpose of running an ad is to get potential buyers to call about the car. Be prepared to answer their questions. But your sole objective in this phone conversation is to set an appointment to have them come see the car in person. The odds of someone buying the car without seeing it first are slim. So ask them to come take a look.
Prepare for the test drive. Once you have an appointment scheduled, make sure the car is immaculate. Clean it inside and out, and make any necessary repairs. When prospective buyers come to look at the car, ask them to drive it.
According to Eric Satchwill, a career car sales professional and Mercedes-Benz dealer, “Your odds of selling any car go up dramatically if they test drive the vehicle. Without a test drive, you probably won’t make the sale.”
Ask them to buy it. This is referred to as “closing the deal.” It’s as simple as saying, “Would you like to make an offer?” At this point, be prepared to negotiate on price.
Few cars sell for the price listed in the original ad. Establish ahead of time what your bottom line price is and stick to it. On the other hand, it’s usually not worth turning down a serious buyer over a difference of a few hundred dollars.
Complete the sale. Once you have a legitimate offer, ask for a deposit. Then discuss the terms of completing the sale and form of payment. Follow the rules in your state for transferring the title and preparing the proper paperwork. AutoTrader.com has a link to every state’s motor vehicle department website, a useful resource for this step.
Additional Resources
Both Edmunds.com and kbb.com are excellent resources for selling a used car. They each have in-depth articles titled “Ten Steps to Selling Your Car.” I suggest reading both of these articles. You’ll find them under the “Advice” tab.
Getting Out of a Lease
According to LeaseGuide.com, one-third of all car leases are terminated early. There are two ways to do this. You can contact the leasing company and ask for the current lease payoff amount. Then you just mail them a check, and they’ll mail you the clean title to the vehicle.
Any lease can be terminated in this way. But there may be additional fees to end the lease early. You will find this information on your lease contract under the heading “Early Termination.”
In many states, this process also works with a third-party buyer. When you sell your leased car, the buyer makes the check payable to the leasing company. The leasing company then transfers and mails the clean title to the new owner.
Your leasing company will provide detailed instructions for executing this process. Be sure to follow the instructions to the letter. Any overlooked detail could cause delays. Be very clear that you want the new title issued in the buyer’s name, not yours. Check your state’s DMV laws to make sure a third-party lease purchase is allowed.
Another option is using a company like Swapalease.com or Leasetrader.com. These websites match people who wish to exit their car lease early with buyers who wish to assume a short-term lease on a vehicle.
Both of these websites offer detailed instructions to walk users through the lease transfer process. Transferring a car lease usually does not require paying early termination fees to the leasing company. But Swapalease.com and Leasetrader.com both charge fees to use their services.
Car Free Success Story:
My wife and I have been weaning ourselves from a car over the last few years. We both owned cars as recently as four years ago, then I sold mine and we shared my wife’s car. We sold her car two years ago, and shared some of the expenses on our son’s car until this April, when we went cold turkey. My wife and I estimate we are conservatively saving $3,000 to $4,500 a year by not owning a car, which we are using to pay off our mortgage early. We anticipate retiring in the next three years. So far it has been an interesting experience. We will reevaluate our decision as we approach retirement. In the meantime, as long as we find we use alternatives very little (taxis, buses, and rental cars), we have had no burning need to buy another car. And the extra money is allowing us to set more important priorities in our life.
What If I Owe More Than My Car Is Worth?
When I decided to sell my Toyota Sequoia, I had ten months left on a three-year lease. The bank said the payoff amount was $24,829. But when I found a buyer, he was only willing to pay $23,800. That meant I would have to pony up $1,029 of my own money to get out of the lease. Ouch!
It seemed like a lot of money at first. But then I did a few calculations. In two weeks I’d have to make another car payment, $470, and another insurance payment, $133. In three weeks I’d have to pay my monthly parking, $120. And the 30,000-mile service on the car was coming up soon: $600. When I added it all up, it made sense to me to write a check for $1,029 to the bank, instead of shelling out $1,323 over the next several weeks.
If you financed your car purchase or lease, when you sell it you may have to add some of your own money to pay off the bank. But remember, the average cost to own a car in the U.S. is $700 per month. So if, for example, the average car owner had to pay $1,400 of her own money to pay off her car loan, she could recoup that amount in just two months. And after the car was sold, she’d be saving $700 every month thereafter.
You’ll have to do the math for your own situation. But chances are paying a little to get rid of your car is a good investment. A one-time expense now will allow you to reap huge rewards month after month into the future.