I truly believe that buying a new car is absolutely the most horrific mistake that young people make after they graduate from college. I’ve done several articles on this site about the bizarre affliction that this country has towards throwing money away on depreciating assets. I want to help you get rid of your car payment because I’m at the point where I literally can’t understand why people don’t see new cars for the scam that they are.
Cars are a depreciating asset (money loser) that people have to borrow money to buy…from the dealerships that are selling the cars. I’ll say it again – People borrow moNEY WITH INTEREST FROM THE PEOPLE THAT SELL THE CARS AND THEY’RE NOT EVEN WORTH THE BORROWED AMOUNT!$!#%)!#(%. ARGHH. IT MAKES NO SENSE.
The reality is that a lot of people get sucked into the trap of buying a new car before they know what hits them and it starts a cycle of habitually driving a debtmobile. By the time they add in housing costs and student loan payments, they’re struggling to make ends meet even with a good job.
But don’t worry – there is hope. You can get out of those payments with a little determination and some clever car selling tricks. I have to give credit to my good friend/former co-worker Beau who taught me everything you’ll see below in this awesome how-to guide. He went from driving an Audi with a payment to a really nice GMC Yukon with no payment (that only cost $6,000).
Because of the things I learned from him, I was able to trade out of my crappy little red truck to a much nicer vehicle for a net cost of only $1,400. The info in this guide is great and easy to execute.
Before I go on, there are a few things that you are going to have to get over if you really want to get rid of your car payment. I’d like to help you cope with them:
- You don’t deserve a new car. Ever. You actually don’t deserve anything, but that’s besides the point. You’ll have to drive a car that isn’t quite as nice as your debt car for a while.
- Cars are not a statement of wealth anymore. I don’t know if they really ever were, but new cars just show off your lack of available cash and ability to make terrible financial choices.
- Cars with over 100,000 miles are not going to blow up. I don’t want to hear the maintenance or lemon arguments anymore. My car could die 10 times and I would come out better financially than a person that buys a new car. You are paying 10’s of thousands just to avoid the inconvenience of a one time breakdown when you buy a new car.
- You don’t deserve a new car for your “achievements”. If you read this site you’re probably in your 20’s or early 30’s. We haven’t done anything yet, so just stop it with all of that.
- You didn’t get a great deal with your 0%-1% interest new car. You gave up tons of cash incentives to get that lower interest rate. The car dealerships win either way when you drive off the lot. Don’t be cocky enough to think that you somehow cheated the system.
*Whew* – that was tough. If I hurt your feelings, I’m sincerely sorry. I really am. Grab a lollipop or something and keep reading.
The Ultimate Guide To Getting Rid of Your Car Payment:
The entire premise of this strategy is that you need to get over the fear of used cars. While many of the products around us are becoming lower in quality, cars are not. Cars made today are now safer, built to last longer, and have higher quality parts in general (some might argue the interiors are not great, but it depends on the brand).
This is the basic outline of what you’ll need to do to get rid of your car payment, and I’ll expand on some awesome tips for each point:
- Evaluate how much you could make in the sale of your current vehicle
- Sell your car for the absolute highest value you can
- Find a quality, safe used vehicle and buy it with the proceeds from your sold car
1. Find The Value of Your Current Vehicle
A common mistake that most people make when they start the selling process is that they only check one source (usually KBB) for the value of their car. You need to get MULTIPLE estimates to get a better picture of what your car is really worth.
Check the value at ALL three of these sites before moving forward:
Don’t try to sugar coat the quality of your car. Be very honest with yourself and don’t guess on specifications for your car. Pull out your owners manual and be sure to get every option that you have on the car.
**As a side note – Carmax is a great option if you want a low-stress experience. They generally give decent trade-in prices for your car (especially if it is a popular model/style in your area). Just remember – you can always get a better deal if you sell the car yourself!***
Shhh….there is also a sneakier way to get find your car’s value that involves a car dealership! 🙂
Find out what a dealer will give you for your car by letting them appraise it. Find a local dealership and ask them what they would give you for the car. Tell them you only have 20 minutes and don’t take any BS from them! It helps if you test drive a car that you pretend you’re interested in buying and let them appraise while you test drive. (Drive a car you think is cool, but NEVER EVER fall in love with it).
This strategy basically puts you in the lion’s den and wastes the salesman’s time, but you might find that you like their offer a lot and go through them if you are looking to dump your car quickly. Just make sure you don’t buy a new car from them, or else reading this far was a complete waste of time.
Car salesmen are nice people, but they want to take as much of your money as possible. Don’t feel too bad about wasting their time, because they would happily put you in a car you can’t really afford without thinking twice.
All’s fair in love and war – especially in the car world.
2. Put Your Car On The Market
This is obviously the trickiest part, and there are a lot of ways to go about it that will yield different results. Remember – you are trying to get the highest price possible for your vehicle. If you don’t, you won’t have enough money to execute step 3 correctly.
Set the asking price based on the amount of time that you have to sell the car. If you have a while, set the price at the highest value that your research from step 1 allows. If you want the car to sell quickly, set the price at the low end.
Selling your car on your own
The most efficient way to get the most value for your car is to sell it by yourself. Selling by yourself allows you to remain in control of the entire process from start to finish. If you have a long time to sell the vehicle, you can set your price high and remain firm.
Selling your car through a third party
If you use this strategy, you’ll trade money for convenience. Using a car dealer with the best offer or services like Carmax will ensure that you sell your car very quickly, but you’ll leave a lot of money on the table.
It’s up to you, but I would highly suggest that you sell on your own.
How to sell your car by yourself
- Set your price
Now that you have done your evaluation research listed above, it’s time to set your price! Make sure that you leave wiggle room for negotiation. People who buy from private sellers expect a deal, but the trick is to make THEM negotiate the price down instead of you bringing the price down. Basically – don’t make it too easy or you will leave money on the table.
If your car has minor blemishes, set the price as if it didn’t. It’s the buyers’ job to find them and get the price down, not yours. Also – don’t forget to add in sales tax if your state has it!
- Take a ton of great pictures (literally 100’s)
This importance of taking GREAT pictures of your car can’t be overstated. Think of it this way – you are trying to attract quality buyers that are serious about making a deal. Here are a few tips on pictures:
- Be honest with your pictures and don’t be afraid to show blemishes.
Most people won’t notice them when they are actually looking at the vehicle unless you point them out. You are also building trust with a prospective buyer if you go this route.
- Maintain your privacy
Cover your plates, blur them out, or take them off the vehicle when you take pictures! Scammers can use your plate info to find your home address – this is very important from a safety standpoint. Also, don’t take pictures in front of your house if you can manage.
- Detail the crap out of the car before you take the pictures
This is a big deal! You want your car to look great on the inside and out. How the car looks gives people a sense of how well you took care of the vehicle. Here are some products that I used for the last car that I sold:
- Tuff stuff (for carpets) – gets most stains out of carpet and cleans leather seats
- Stoner Trim Shine – makes all the plastic on your car’s exterior look BRAND NEW! The can version works well for small areas and the spray bottle is good for huge areas of plastic trim
- Turtle Ice Spray Wax – much faster than real wax and works very well
- Turtle Wet N’ Black – makes your tires look freaking awesome
- Any quality car wash soap
- A washing mitt and some microfiber towels
Altogether you will spend about $30-$40 on these items, but it can add $1,000 or more to the sale price of your car easily. Great investment!
This is what my old red truck looked like after it was detailed:
Now for the hard part – actually selling your car!
This can be the most intimidating part of the entire process. There are three main strategies that I would suggest:
****Since you have a car payment, you need to tell the buyer that there is still a lien on the car. This isn’t usually a big deal, but it could change things depending on your loan company. Make sure you contact your lender and ask about the process of transferring a title with a lien on it!
Also before you do anything, CHECK YOUR STATE’S DEPARTMENT OF MOTOR VEHICLE SITE. There may be special forms you need to fill out or have the buyer fill out for transferring the title. The person that sold my car to me forgot about this, and I forgot about it when I sold my car (failure I know). Know EVERYTHING you need to have to transfer the title after you sell the car to avoid total frustration. Trust me.****
Also – use a bill of sale as a physical record/receipt of the transaction. Click here for one that I like.
1. Park the car on a busy street
This one gets your car physically out in front of people and is old-school. Leave a for sale sign with the price, mileage, age, and your phone number/email address in either your front or side window and wait for calls to come in. This is slow, but you are likely to get serious buyers that actually get out and inspect your car.
This is how I sold my last car and it worked very well. Within a week it was gone!
2. Use a paid internet marketplace like Autotrader.com
I found my last car on autotrader and was very happy with how easy it was to find good cars. You will have to pay $50 to post your car’s ad on the site. Sites like these tend to bring SERIOUS buyers instead of tire kickers.
For the love of everything good in this world – make sure you add a cover picture to your car’s ad or you will look like a scrub and not sell your car as quickly.
Ugh. I hate even mentioning this option, but many people use it and like it. I think craigslist is full of scammers and people who aren’t serious about buying cars. If you use it, proceed with caution and suspect that everyone calling you has shady intentions.
A few thoughts on the art of negotiating
-Take the emotion out of the game
You need to understand that people are going to try to beat you up on the price. You may get lucky and have someone that needs your car badly and will make it easy, but some people won’t. Don’t get mad if they lowball you! Have an acceptable minimum number in your mind ahead of time and don’t let the car go for less. It’s THAT simple sometimes.
-Make the buyer find flaws
It isn’t your job to point out what’s wrong with your vehicle. If they are a smart buyer, they will rattle off every tiny thing they see within earshot. Even if they do use that strategy – make them say a number first! Here’s something important to remember about negotiating:
He who speaks first loses.
Always try to get someone else to make the first offer so that you can counter. It seems silly, but you will leave money on the table if you fold first and start blabbing lower numbers than you should.
Close the deal!
When you have agree on the price with a seller, don’t just shake on it. Get started by filling out a bill of sale. Most importantly, don’t ever do financial transactions in a shady place! Always go to a neutral location (preferably a bank) to tie up the loose financial ends.
3. Now it’s time to buy a used car
Now that you’ve gotten rid of your car payment, it’s time to find a debt-free ride! There are a lot of factors that determine how much time you’ll have to complete the buying process. If you have a spouse – you might need to carpool for a couple days.
If you are single and don’t want to be without a car, try to time your sale later in the week so that you can rent a car for the weekend and hustle for a new vehicle. Renting a car does suck, but you will still come out FAR better financially by renting for a day or two than making car payments for the next 3 years.
Bottom line – You’ll have to work out the logistics of getting around, I can only do so much for you! 🙂
Here are some tips for used car shopping:
The great thing is, if you just sold your car, you’ll have enough information to buy a used car.
- Use a site like Autotrader.com for higher quality cars and serious sellers.
- Never be afraid of a vehicle with 100k+ miles if it has been regularly maintained and is in good condition. Cars are built to last much longer than 200k miles. Period.
- Carmax and auto dealerships will take less time, but you can buy a car cheaper if you do it yourself.
- Cash is king. Theres something about saying you are a cash buyer that gets people excited. If you sold your car with a payment correctly, you might actually have enough to buy your used car with! If you don’t have enough cash left over after you sell, you may have to dip into your funds to make this happen. There IS another hack that involves using a personal loan, but it’s long enough for another post! Email me if you are really serious about getting out of your car payment and I’ll explain it to you.
- Point out every single flaw to the seller. Every. Single. One. This will give you more leverage for negotiation. Also, try to get the seller to throw out a lower number first 🙂
- Be safe and don’t trust anyone. Bring a friend to look at cars with you if possible.
- Always test drive the car and ask a ton of questions about the history.
- Research common issues or mechanical failures about a specific vehicle/model year BEFORE you go look. Ask the seller point blank if they had any of the common issues you found. Try to catch them off guard to get a more honest answer.
RUN A CARFAX ON A CAR YOU ARE SERIOUS ABOUT
If you find a car you REALLY like, spend $30 on a Carfax report. You can do it from your phone on their app or website while you are looking at the car. It will pull up major information like past wrecks or flood damage, or if the car was in Mexico for 10 years before it came across the border (I’m actually serious, that is an issue for us in Texas). It even pulls up oil changes and maintenance if the work was done at a dealership. The $30 is totally worth it for the peace of mind.
Once you find and buy a car, take care of the loose ends.
Complete a bill of sale, and make sure that you know what will be required to transfer the title. Also – be ready to pay sales tax at the time of the title transfer (check your state’s guidelines to get an idea of how much you’ll pay).
That’s it! Enjoy your debt freedom and start using that freed up money to pay down some other debt or invest/save!
For whatever reason, my car posts are always the most popular ones that I do. Check out my past anti-new car posts for more info. If you have any questions about getting rid of your car payment, go to my contact page and shoot over an email: