As the coronavirus pandemic continues, many Americans may be considering selling their car, especially amid the rise of working from home in 2020. According to surveys performed by Stanford economist Nicholas Bloom, 42% of the U.S. labor force is working from home.
In addition to gaining money on the sale of your vehicle, you may also save money on monthly payments on your auto loan. And if you don’t plan on driving a car anytime soon at all, you may also consider dropping your car insurance, which costs an average of $1,004.68 on average, according to the Insurance Information Institute.
Before you start the process of selling your vehicle, though, here are some things to consider and what you can do with the extra money.
Is now a good time to sell your car?
Selling your vehicle could improve your financial situation in some ways, but it could make other aspects of your life more difficult.
For example, if you live in an area where you can’t easily get to the grocery store or other necessary places, selling your car could do more harm than good. But if you live in an area with good access to public transportation and you don’t see a scenario where being without a car is a major disadvantage, it may be worth losing the convenience of a car.
Getting rid of your vehicle may also sound appealing if you feel like you’re paying too much for car insurance. Again, consider other potential consequences of selling your car before you pull the trigger, and weigh the benefits and drawbacks.
Also, keep in mind that if you choose to sell your car and cancel your insurance coverage, you may want to still buy a non-owner car insurance policy. This policy not only makes sure you’re covered if you drive another person’s vehicle regularly, but it also ensures you don’t experience a lapse in coverage, which can make it harder to get affordable coverage in the future.
Consider using an online marketplace like Credible to find an auto insurance plan that fits your needs.
5 ways to use your money after selling your car
If you’ve considered all aspects of the situation and decided to move forward with selling your car, here are some potential ways you could use the proceeds from the sale and ongoing savings each month:
1. Pay down debt
If you have high-interest debt, you could use your extra cash to pay it off more quickly, which can save you money on interest charges and also free up even more cash flow. To maximize your savings, consider using a balance transfer credit card to get a 0% APR promotion on a transfer from another credit card. Alternatively, you can use a personal loan to consolidate credit card debt and pay it off with a set repayment schedule. Consider using an online marketplace like Credible to compare balance transfer credit cards or use a personal loan calculator and compare personal loan rates.
2. Boost your savings
If your savings account is low, the best place to put your cash may be in your emergency fund to protect you in the case of future financial difficulties. Alternatively, you could put some or all of the money toward other savings goals, such as retirement, education, health savings, and more. Compare high-yield savings accounts from Credible to maximize your return.
3. Refinance your loans
Another way to pay down your debts quicker is through refinancing. For example, you could refinance student loans or a home loan with a shorter repayment term and use the money you’re saving each month from not having a car to make the higher monthly payments. If you have student loans, use a student loan refinancing calculator and compare refinance rates to find the right fit.
4. Set yourself up for homeownership
If you’re hoping to buy a home in the future, consider using the extra money from your car to put toward that mid-term goal with a down payment and closing costs.
5. Improve your lifestyle
It’s a good idea to make sure you’re in good shape financially. But if you have some leftover cash, think about using some of it to improve your lifestyle, whatever that looks like for you.
The bottom line
Selling your car may sound like a good idea right now, but make sure you consider your long-term needs and goals before you move forward with the sale. If you do decide to sell, have a plan beforehand for what you’re going to do with the money, so you can maximize the financial benefits from no longer having a car.