How to Get Rid of Your Car Payment: The Ultimate Guide

How to Get Rid of Your Car Payment: The Ultimate Guide

rid of car payment

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.

Get rid of your car payment

Sorry.

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).

Get rid of your car payment

Would you drive the one on the right for only $6,000 and NO car payment?

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.

Get rid of your car payment

My $1,400 ride!

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Get rid of your car payment

The road to recovery is long, but you’ll be OK.

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:

  1. Evaluate how much you could make in the sale of your current vehicle
  2. Sell your car for the absolute highest value you can
  3. 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:

-KellyBlueBook.com

-NADA.com

-Edmonds.com

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! 🙂

Get rid of your car payment

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) 

Get rid of your car payment

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.

Get rid of your car payment

  • 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:

Get rid of your car payment

Detailing your car is a SOLID investment.

  • 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:

Get rid of your car payment

So fresh and so clean!

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.

3. Craigslist

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.

Get rid of your car payment

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.

Get rid of your car payment

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.

Get rid of your car payment

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:

I Deserve a New Car, Right?

 

My Car Hit 100,000 miles. Is It Time to Buy Something New?

 

Three Ways Craigslist Car Sellers Try To Trick You

 

Live differently, your bank accounts will thank me later. -M$M

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20 comments… add one
  • Hannah Jan 12, 2016, 8:05 am

    One tip on buying used cars that have a Prior Salvage Title is to figure out why. Our car was a prior salvage that was due to flooding. This means that the interior was absolutely wrecked when it had about 100K miles on it rendering it “worthless”

    We bought the car for about $7K and had a year without any maintenance issues at all. We’ve had a lot this year (to the tune of $2.5K), but that’s how the cookie crumbles. Maybe we’ll get lucky again this year.

    • Millennial Money Man Jan 12, 2016, 9:32 am

      That’s a great tip – I didn’t even mention salvage titles. Houston has a really bad problem with flooded used cars because of all the rain we had a few months ago. Glad it’s worked out for you! (BTW – $9.5k sounds a lot better than $40k for a new car. I think you killed it!) 🙂

      • Logan Dec 27, 2016, 8:51 pm

        Millenialmoneyman. Just a side tip from a guy who loves to save money and used to sell cars. Instead of spending that 30$ out of your own pocket on a carfax go to a dealership and tell them you just don’t ave your trade but you do have vin and miles and you want a rough trade value. This will work 90% of the time to get history told to you for free just the way I like it.

        • Millennial Money Man Dec 28, 2016, 7:55 am

          Great tip! I did CarFax on the last buy because I really wanted the car and was ready to make a cash offer on the spot. If you think you have more time than I did and the car is closer (this guy’s car was an hour away), this is definitely worth a shot!

    • guest Jan 22, 2016, 8:34 pm

      For the love of all sweet and decent NEVER buy a salvage car unless you are a mechanic. they ABSOLUTELY DON’T have to fully disclose the true reason it was salvage. All they need to tell you is that it was salvage, thus valued at scrap. The responsibility stops there.

      The biggest problem with a salvage car is likely going to be flood damage. The car looks good, maybe has new interior but the entire electrical system was compromised. It can look awesome and run good for a bit and can develop hard to diagnose and fix electrical issues.

      If the car was ACTUALLY good the original owner is given the option to buy back the salvaged car from the insurance company and keep the insurance check. I personally did this on my own car after it was scrapped. Through heroic efforts on my part it lasted 2 years. It wasn’t worth it. I learned a lot about fixing cars and how nice my bosses were about being tardy.

      • Millennial Money Man Jan 23, 2016, 11:32 am

        I tend to agree with you – I personally would never buy one with a salvage title…ESPECIALLY where I live. Tons of flooded cars. There are too many used cars with clean titles out there to go that route IMO.

  • Des @ Half Banked Jan 12, 2016, 8:08 am

    This seriously is the ultimate guide – I love it! I’ve been lucky enough to dodge the new-car thing – my mom’s favourite thing to tell me growing up was that if you can’t pay cash you can’t afford it, even if it’s a car – and I think I have a few friends who are going to get this emailed to them as a gentle nudge 😉

    • Millennial Money Man Jan 12, 2016, 9:34 am

      Ha thank you! It took me forever to write this one, and I still left info out because it was getting way too long. Send it to them and I’ll take care of their silly new car wants. *cracks knuckles*

  • Harmony @ CreatingMyKaleidoscope Jan 12, 2016, 11:08 am

    We have been car-payment free for the past couple of years. With the arrival of our third child in April, everyone has been asking us when we are going to buy a van (new, of course). They all seem shocked to hear that we are making do with what we have as long as possible. The oldest is in kindergarten, so only two kids need a ride to daycare. We usually don’t go many places with all five of us. When we do, we either take two cars or borrow my father-in-law’s big boat.

    I will be bookmarking your tips for buying used cars. We will need to purchase something else eventually. But it will be a used vehicle and we plan to save up cash for the purchase.

    • Millennial Money Man Jan 12, 2016, 12:35 pm

      You just made my day – never listen to the people that think you should buy new!

    • Mortimer Jan 18, 2016, 12:57 am

      The whole “you need a van for a family of 5” line is such total nonsense. When our third was born I caved to the pressure and we got a minivan—used, at least—that had an unbelievably low 14mpg. It was a total cash suck, although it did not require too many repairs. We recently switched back to having sedans, and it is not a big deal at all. We can even all cram in one, and have done so for 2+ hours car trips. It’s really not so bad. And if you put a movie on for the kids, they barely even notice. Good luck!

      • Millennial Money Man Jan 18, 2016, 11:21 am

        SO TRUE. I keep seeing my friends buy new vans purely because they feel like they are supposed to. I don’t have kids, but I’d pile them into my 2004 Yukon XL any day for $1,400.

  • Josh @ FamilyFinancier Jan 16, 2016, 3:27 pm

    I’m all over your point that cars with over 100k miles are NOT going to fall apart. My most recent purchase was a used BMW with 120k miles on it, but the car fax showed that it had been meticulously maintained over it’s lifetime. That knowledge coupled with my love of DIY car maintenance made for a reassuring purchase!

    Thanks for helping to bring the masses towards reason!

    • Millennial Money Man Jan 18, 2016, 11:22 am

      No problem Josh, I’m trying as hard as I can! My car has 110,000 and I would feel very comfortable driving it long distances.

  • MB @ Millennial Boss Jan 30, 2016, 11:26 pm

    Hah I had two 20+ year-old cars that I drove prior to buying myself a brand new SUV because I had a long commute. You wouldn’t believe how many people (friends, family, coworkers) pressured me into buying the new car. I don’t know why people love to make other people spend money. I do love this car and it’s great for where I love/the snow but if I did move, I would sell it. I am planning to pay if off in March or sell it. Thanks for the breakdown. Selling it private sounded scary to me but with the way you broke it down, I think I can do it. Appreciate it!

    • Millennial Money Man Feb 1, 2016, 11:53 am

      After selling mine privately, I probably won’t sell another car a different way from now on. The real trick is to advertise on a quality site like auto trader if you want serious buyers. I think it costs $50, but totally worth it. Honestly I would pay the car off and just keep it for a long time if it will be done in March.

      Cars are something that has been woven into the fabric of the American lifestyle of the last several decades. People think it means freedom (which maybe it used to a long time ago), and they still equate it to that today. It’s all part of some really clever and aggressive advertising by car companies. They spend tons to influence people into financing their products!

  • Mike May 16, 2016, 11:06 pm

    I’m actually going to disagree a little bit. I’m an engineer and I work hard and earn good money. I’ve saved rather aggressively for several years since graduating and have an excellent credit rating. I recently bought a 1 year old vehicle for $45k (avoided the steep 1st year depreciation). I could have easily paid cash for the vehicle, but was able to finance it through a third party credit union for 3.2% (not a dealer ‘move the profit around’ trickery rate) so I decided I would rather keep more of my investments and finance a portion of it . I put enough down that I should get my downpayment back in 5 years based on estimated depreciation.

    I don’t disagree that many millennials are often wrongfully entitled, but I do think that I ‘deserve’ to drive a newish vehicle if I want. I was fully aware that the vehicle would cost me ~$10,000 a year, but I bought it anyway. Most here would consider that a ‘waste’, however I do a lot of driving to commute to work so it’s I luxury that I feel I’ve earned and deserve even if I’m only 25. I still manage to save ~50% of my after tax income. Call me entitled if you want, but people should be able to spend their money how they want as long as they’re fully aware of the costs.

  • The Savvy Couple Aug 23, 2016, 2:17 pm

    What an amazing article! We agree with you! We drive a 2005 Toyota Camry and a 2005 Chrysler Town and County without having kids! Lol.

    Why borrow money on anything that reduces in value. Does not make sense. Start being Savvy people!

    Ps…How long did this article take you to write it’s very detailed!

    • Millennial Money Man Aug 23, 2016, 2:21 pm

      Haha I don’t remember how long it took, but it’s over 3,000 words. By far my longest one to date, but I didn’t want to leave anything out!

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