My partner and I have been in debt since 2021. We’ve spent three years working on it. Last year, I sold my car for $11k and paid off a credit card.
This year, we haven’t saved any money. We’re sending payments to the credit cards, which total $10,500, and covering bills including our car. We pay $388 monthly for the financed car and $150 for insurance, with a payoff amount of $9,400.
Today, I checked CarMax, and they’d give us $19,400 for the car, minus the payoff. We’d walk away with about $10k.
My partner has a work truck, so we won’t need the car for personal use.
I suggested selling the car to CarMax to either pay off our credit card debt or finance a cheaper vehicle with no down payment. My goal was to be debt-free this year. I know $10k may not seem like a lot, but we were in about $30k debt. These past three years have felt exhausting.
We only have $1k in savings. What do you think? Would you keep the car and keep making the $388 payments plus insurance (around $550 a month) and slowly pay off the credit cards? Or would you sell the car, use the $10k to pay off the credit cards, leaving us carless? Should we sell the car and find something cheap to drive around with lower payments? Any advice would be helpful. Thanks
If your credit cards are at 0%, maybe wait before financing a cheap car until that deal runs out. But you could lose out on a good price for your current car, so selling now might be wise. Trading 0% for a car loan could end up costing more. It could work out if you need two cars later, but having car debt might be better than credit card debt.
@Davi
If the person who posted this or their partner knows about cars, that advice makes sense.
But used car prices have gone up— I used to only look at them, but now the price difference isn’t worth it on a decent one. New cars often have fewer problems.
If they have a trusted mechanic or know cars well, that might change things, but for most people, buying used isn’t as smart financially as before.
If you really want to sell the car, consider doing it privately for its full value. It’s a bit more work since you owe on it, but the extra money could be worth it.
Whatever you make over the $10k equity can go towards your next car down payment.
By the way, what’s the make and model of the vehicle? How many miles is it, and what’s its condition?
@Freddie
2021 Toyota Corolla SE, 20,000 miles. Had one fender bender—only replaced the bumper (not our fault). The car is in perfect condition, no wear and tear.
Olin said: @Freddie
2021 Toyota Corolla SE, 20,000 miles. Had one fender bender—only replaced the bumper (not our fault). The car is in perfect condition, no wear and tear.
After checking the used car price for that model in my area (Dayton, OH), it looks like CarMax is giving you a fair offer. I’d sell to them to avoid the hassle of a private sale. Good luck with whatever you choose!
The issue with 0% is it usually lasts only for a short time. Then a high interest rate kicks in. If you do what the lender hopes and don’t pay it off on time, the interest can be overwhelming.
I get that waiting might seem like a good idea, but it’s risky. If anything goes wrong and you can’t pay off the $10k, you might end up stuck.
If you can manage without a second car right now, I’d suggest selling it, paying off the credit card debt, and clearing it out. Once that’s done, you can save money that was going toward interest to buy another car when you have enough to pay cash.
Rayne said:
I’d sell the car and take the $10k. Then buy a used cash car in the $2,500 to $3,500 range and put the rest toward paying off the credit card debt.
I agree. Get a Honda or Toyota. They are reliable and usually hold their resale value well.
Car prices are dropping right now. The longer you wait, the less value your car will have. My car’s value went down by almost $400 in the last few months. If you’re thinking about getting a different car, now is a good time.
Try to do it before Election Day because after that, car prices and interest rates will likely rise.
Of course, I’d sell the car and get out of debt. CarMax isn’t known for overpaying, so if they’ll give you $20k, see what you can get on the open market—maybe sell it for $23k. Plenty of decent cars are available for $10k or less.
I recently bought two older vehicles; both run well. One was $5k, and the other was $4k. The insurance for both together is cheaper than one with full coverage.
When I hit this wall, I went back to school. It’ll take a few more years before I’m out of debt. A college student probably has a lot less debt than I do.
Being debt-free sounds great. You’re close to the finish line. I’d keep the car since it’s reliable for your family. Keep transferring to 0% as long as you can. Maybe consider picking up a side gig for a while? Either way, congrats on your progress!