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According to Lending Tree, Americans currently owe more than $1.2 trillion in auto loan debt. It’s nearly 10% of the total American consumer debt.
After I had my daughter in 2015, I thought I needed a bigger car. That is what new moms do right? At the time, I was driving a 2013 BMW 328i. I financed this car two years prior and the warranty was about to expire.
Like most, I did not want to pay or did not have the money rather, to keep up with the routine maintenance, so I figured the time was right to take on more auto loan debt by financing another car with a said warranty.
I went to the dealership with my daughter and keys in tow and signed on the dotted line to purchase a brand new 2016 BMW X1 for a price that makes me gag when I look at it now. I was so excited, at the time.
Since starting our journey to debt freedom, I went back and forth about whether or not I should sell my car or simply pay off this massive auto loan debt.
Both were feasible options, but I finally made up my mind to sell it in March of this year. I was sick and tired of paying more than $600/month for this car. Plus, the price to pay it off and maintain it is not worth it. It is not a part of our future financial plan simply put.
How we came to this decision
- My monthly payment is $665 (cringe…I know) and if that is gone, that will make a huge impact on our budget and snowball.
- The cost to maintain this car is much more than I would like to spend even though we could probably afford it. Up until recently, my car has been under warranty so all the maintenance costs have been covered 100%.
- Our auto insurance will go down.
- I will no longer feel obligated to only use premium gas.
- I do not want to pay over $25,000 more on this vehicle. It has already depreciated so much.
- It just makes sense. Do I need a BMW only to have it sit in a parking garage all day while at work or in my garage at home? Nope.
- I am sure there are plenty of other logical reasons why this makes the most sense as well.
Selling car, what’s next?
In April, we paused our debt snowball and decided to put every extra dime towards saving cash to purchase a new vehicle. We set a goal of saving $10,000 and we were able to accomplish that goal in just four months. Now, we are focusing on paying the underwater portion to clear this auto loan debt, which is about $8,000.
- How to create a zero-based budget
- Start paying off your debt today
- 10 ways to trim your monthly expenses
I do not know if there is a market to sell luxury cars privately; I need to research this, so I will probably end up selling it back to the BMW dealership or to Carmax. Once this car is gone, we will be well under the $80,000 of debt mark and our snowball will grow tremendously.
Cheers to exhausting all options in order to meet our financial goals. Maybe I will convince my husband to get rid of his auto loan debt!
If you have sold your car and replaced it, let me know in the comments why you chose to do so.