Why Suze Orman Says Now is the Time to Sell Your Car

Why Suze Orman Says Now is the Time to Sell Your Car

Cars offer a lot of freedom, but that freedom comes at a high cost. By some estimates, owning one can net you close to $ 10,000 a year.

Think you are ready to let go? You are lucky.

“If your household can run on one less car, there’s never been a better time to sell,” writes silver expert Suze Orman in a recent blog post. “You might be able to sell it for a price close to what you paid, or maybe even more. “

She is not alone in her assessment. Another financial advisor says he was almost 40 years old since various factors have aligned so perfectly to make sell your car such an attractive – and profitable – option.

Used car prices have gone up this year

Row of cars for sale with prices hanging from rear view mirrors.

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While some households have needed one, two or even three cars in recent years, the pandemic has seen many people abandon their trips and rethink their finances.

“If you’re keen on cutting back on your expenses, I’ll suggest you look in your garage or driveway,” Orman writes in the post office.

New car manufacturing has stalled due to a global shortage of semiconductor chips. And with the supply of new cars drying up, the demand for used models has exploded.

Prices finally stabilized after months of strong increases in the spring. Still, the average cost of used cars and trucks in August was up 32% from the same month last year.

But prices may not stay inflated for long.

“The pace of new car production is expected to pick up soon,” Orman writes. “When that happens, what you can collect for your used car will likely decrease. Now is the time to use a car sale to help you reach important financial goals.

Ownership can be a surprising burden

Car keys and money on table with man using calculator.

Tero Vesalainen / Shutterstock

Dan Demian, a financial advisor with the Albert Money Management Service, says Orman is right about the money.

He estimates that owning a car costs around $ 600 to $ 800 a month just for gasoline, loan repayments and a reasonably priced auto insurance policy.

Once you add parking – which can cost hundreds in a large city – tires and regular maintenance, that budget could quickly double.

“It doesn’t really touch you [how expensive a car is] until you’re really committed to it, ”Demian explains. “There are so many expenses associated with buying a car that it often defeats the purpose of the car.”

Come to this way of thinking? Demian suggests that we are currently at the peak of car prices, which are expected to decline over the next six to 12 months before finally returning to normal.

Where this money can go instead

View of the above woman dealing with unfurled bills while sitting on the bed.

Pormezz / Shutterstock

If you could survive without a second car – or no car at all – Orman encourages you to consider all the other things you could do with that money.

“It can be such a financially liberating decision if you are currently paying off a car loan,” she writes.

Specifically, Orman suggests redirecting this money to:

  • Set up an emergency fund. That $ 800 monthly turns into $ 9,600 over the course of a year. This can be a substantial cushion of money, and if you put it in a high yield savings account, it will have a chance to grow at a reasonable rate while you are not using it.

  • Pay off credit card debt. High Interest Rates On Credit Cards Can Bury You If You Don’t repay them quickly. Dealing with debt can be a huge relief both financially and emotionally, Orman says.

  • Fully fund a Roth IRA. With $ 500 per month, you could maximize your eligible contributions. Orman is a big fan of these retirement accounts because you won’t face a big tax bill later in life. You can open a Roth IRA with a bank, brokerage, or robot advisor – a popular app lets you build one with “spare change”.

If you absolutely must buy a car now

Young couple shaking hands with sales agent after successful car purchase.

Harbucks / Shutterstock

While today’s high prices are great for car owners, they can be terrifying for anyone who needs to buy a car in the near future.

“I would definitely say you should rule out any other cheaper possible transportation first,” Demian says. “There are so many options you can use to get around now. “

If you absolutely have to buy a car now, he suggests spending some time saving for a larger down payment to lower your monthly loan payments in the long run.

You can save even more by shop for a better rate on a car loan instead of taking whatever your bank or dealership offers you.

Otherwise, Demian recommends looking long and hard for a used car that fits your budget. He tells his customers to follow the 10/30 rule: Your car payment shouldn’t be more than 10% of your monthly income, and the vehicle shouldn’t be worth more than 30% of your annual income.

If driving from batch to batch looking for offers doesn’t fit your schedule, you can always simplify your search and buy a used car completely online.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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