Selling your Car to Raise Cash

With fuel prices rising there’s lots of advice going around about how to lower transportation costs. I hear everything from “hypermilling” to making sure your tires are always full. The biggest consideration on cutting back on driving costs is to determine whether you can get rid of your car entirely.

Getting rid of your car sounds extreme, and might be for some. However, if you’re one of the millions of American families with more than one vehicle, consider sharing and downgrading. If you live near public transporation routes, consider using them.

Owning a car costs quite a bit more than most realize. We typically only consider the cost of filling up our gas tanks, but the reality is that you end up paying monthly insurance bills, recurring and non-recurring maintenance, and it costs of money to simply hold the capital asset (if you sold your car you could pay off other bills, i.e. credit cards that come at a high cost).

To illustrate opportunity cost, let’s say you have $20K in credit card debt with a 12% APR (many people have as high as 30% APR). If you own a car that is worth $20K (meaning you could sell it for that much today), you’d end up paying $200 per month pure interest payments on that debt you could otherwise pay off by getting rid of your car.

Totalling the obvious and more subtle costs can easily bring monthly vehicle expenses to $500. Remember that this is after-tax dollars going to what is often a luxury. We should all give it some serious consideration on whether or not we can downgrade to a single car per family, car pool with friends, or take public transportation.