How I Got Out of a $23,000 Car Loan

rid of a car loan

 

I financed a new car and poured down-payment money into the pockets of the lending bank. A year later I realized that I would not benefit from paying a vehicle for six years, payments going into an already old car as if it were new, due to depreciation. I am also not a fan of debt since it holds me back from spending money in the right things, things that make me happy. I decided to be rid of debt and went on a valuable journey to freedom from a six year sentence.

 

The Options

Several choices came up on my research:

  1. Pay the remaining amount. Unfortunately this was not a choice for me since $23,000 is not an amount I could easily come by while lifting the couch cushions.
  2. Stop paying for the car. Credit is an invaluable asset if used correctly, so damaging my credit was also not an option.
  3. Sell the car. A great option which worked for me and should be the only option to be considered in most cases.

 

How to Sell the Car You Still Owe

The first step for me was to find the current market value of my car, which can be done easily using http://www.kbb.com. Then, I went to several dealerships, called others and requested quotes online for the purchase of my vehicle. CarMax gave me the most value for it, $24,000. In this case I had what is called positive equity, in which a vehicle is worth more than the current debt it has, and that’s a good thing. I received a check for $1,000 and the vehicle taken off my hands. In case of a negative equity, it’s still best to be rid of the car debt since it’s better to owe $1,000 and not the full $23,000 that remained. Negative equity can be resolved by borrowing the remaining amount owed, using a credit line or negotiating with the lender (Yes, negotiating the reduction of the debt is possible but works mostly for small lender companies).

The process was simple; I went into the CarMax dealership and asked them to purchase my ‘vehicle debt’. They offered a quote and I accepted. The rest is signing papers and calling for a ride home. The dealership also took care of updating the department of motor vehicles of the new transaction.

 

Lessons Learned

A car should be purchased in cash to avoid interest fees and monthly payments. It’s always best to be rid of debt, since money now has more value than money later and car depreciation will render most cars worthless before the debt is fully paid. Additionally, financed car will always require a much more expensive insurance policy, just to protect the bank. Down-payment is never necessary when purchasing a car; it is mostly a strategy used by the car dealer to have some fast cash in their pockets, money that is already lost once the car is purchased. Always use http://www.carfax.com/ to ensure that the vehicle has at most, aesthetic damage; if the car is bought used. I took a mechanic with me to confirm that the car wasn’t only façade. Always calculate the interest rate and fees beforehand to compare the amount the dealership is offering. Use: http://www.autotrader.com/calculators/. Most importantly of all, I was sure to love the vehicle and know that money spent in transportation is money I don’t have for my goals, so buy cheap.

3 thoughts on “How I Got Out of a $23,000 Car Loan

  • Hi Edwardo, Certainly!

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