Should I sell my car?

The Friday “Ask the Readers” column generally follows a set format: I introduce the topic, share a reader e-mail, give my best advice, and then ask for your feedback. Today's column is a little different. Sarah sent me a 1000-word question, and rather than write any sort of response, I'm just going to let her have the entire space. Everything that follows is from Sarah.

I have a question for other GRS readers. It's a simple question: Should I sell my car? It actually seems to have a very simple answer: Yes.

I keep writing lists and outlining the reasons why I should sell my car (and why I shouldn't), and the balance lies very clearly in favor of selling my car. And yet I'm having the hardest time selling my car.

Why? I'm a practical, logical, pragmatic person. Why is this so hard to do? Why is selling my car so difficult? Even with the facts laid out, staring me in the face, I'm having the hardest time selling my car.

Why I Bought a Car in the First Place

I used to live completely car-free. I lived in different cities and only walked, bused, or biked to get around — occasionally living the high life and taking a taxi when I felt like being luxurious. And then I moved to California.

I bought a car last year. I purchased a 2010 Toyota Matrix from a dealer, priced at $17,490, with a $1000 rebate for being a recent college grad. The Kelly Blue Book value of the car, at new, was $20,049. My purchase price was $16,490. With taxes, registration, and fees, I forked over $19,009. As a somewhat-savvy consumer, I secured a three-year financing plan with 0% interest.

I bought the car because I lived 40 miles from my job, commuting an hour each way (through San Francisco, across the Golden Gate Bridge), and there wasn't sufficient public transportation to get me to and from my job.

I've now owned (and paid for) the car for 12 months, spending $6800 on car payments. I have $12,200 left to pay on the car over a two-year period.

The cost of the car has been unbelievable. In one year, these are the costs:

  • Car payments — $529 per month
  • 20,000 miles total
    • 25 mpg average
    • gas price is $3.15 in California
    • $2520 for gas, or
    • $210 per month in gasoline
  • Maintenance for one year (four tune-ups at $109 each) — $436 ($36 per month for maintenance)
  • Insurance — $109 per month for insurance (AAA)
  • Bridge Tolls (crossing the Golden Gate Bridge every day costs $5) — $80 per month
  • Parking. I'm lucky to have free parking, mostly, unless I drive downtown — $50 per month is my average for parking

Every month, I spend about $1014 on driving and owning the car. $1014! This is roughly one third of my take-home income. What would I do with $1014 per month?!?

In addition, I have a substantial amount of debt from undergraduate and graduate student loans (in the realm of $80,000) that I'm currently working hard to pay off. The student loan payments are $679 per month. I struggle to make the car payment and the student loan payment each month.

Today: The Current Situation

In November, I moved back to San Francisco, because I couldn't stand the long commute. Commuting through city traffic is tiring and psychologically draining; I quickly remembered why I dislike driving so much. In contrast, San Francisco is a hub of public transportation options — sometimes better or worse, depending on the neighborhood that you live in.

I now live eight miles from my job in Sausalito. The drive takes about 15-20 minutes, depending on traffic. Parking at my job is easy, but parking in San Francisco is a nightmare — it can take up to 40 minutes to find a parking spot. I have the option of purchasing a parking spot, but those cost upwards of $300 in a city like San Francisco, and I can't stomach how much I'm already spending on the car alone.

I now have alterative means for getting to work. For example, I can bike to work a few days per week, depending on the day and the weather. There's also a bus line that goes to and from my work on the hour, and takes about 30-40 minutes to get to work (it doubles my commute time, but I don't have to worry about parking, driving, or concentrating on the road).

The (Easy) Conclusions

I worry that it's a mistake to sell my car after owning it for one year. My parents tell me that I should wait it out for the next two years, buckle down, and just finish making the payments — because I need a car and can't possibly live without one. People suggest that it's foolish to buy a brand new car and sell a car within the first year of ownership.

However, I also think that sunk costs are sunk costs. What I've already spent on the car is gone; it's what I spend in the future that's still up for determination. I think it makes sense for me to sell my car.

Here are some reasons I think I should sell my car:

  • Living in a city — with ample public transportation, alternative car-sharing options, bicycle riding, and walking — makes having a car a luxury, not a necessity.
  • Getting rid of $12,200 of unpaid debt is a good thing.
  • There are additional costs to car ownership — insurance, gas, parking, maintenance — that will continue to add up over time. (To the tune of about $450 per month.)
  • The current value of my car ($14,000) is more than I owe on my payments ($12,200)

But wait! There's more!

  • A car is a depreciating asset, and will not add any value over time. Struggling to make these payments does not help me reduce or eliminate debt in other areas of my life.
  • Public transportation to work costs $4 each way, or approximately $160 per month.
  • If I also choose to use a car-sharing program on the weekends, I would spend between $50 and $75 for a weekend use — but the cost would be elective, and not fixed.
  • If I don't spend the money on the car, I can spend the money on other things that are more important.

It seems painfully clear, on paper, that I should sell my car. And yet I get in and drive it every single day — to teach swim lesson after work, to dinner parties, to events, on trips to Tahoe, on excursions. I am afraid of selling my car. Psychologically and emotionally, I'm attached to it. I also stubbornly don't want to admit I made a mistake in buying the car in the first place.

So tell me, fellow GRS readers, what should I do? Can I afford to sell my car? Can I afford not to?

J.D.'s note: Though I don't have room for my traditional long reply, I'll just chime in to say I'm glad that Sarah mentioned sunk costs. That's a very important thing to remember in making these sorts of decisions. (What you've spent already is irrelevant; it's what you spend going forward that matters.) And I think her situation highlights why it's often best to buy a cheap used car than a brand-new one. I think a $2,000 beater would be perfect for her.

More about...Transportation

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karen
karen
9 years ago

Why would a NEW car require 4 tuneups?

Sounds like she might be “be taken for a ride” by her mechanic.

Most stuff that would break would be covered on new cars and cost nothing.

jason
jason
8 years ago
Reply to  karen

first year maintenance should be only oil changes, every 3000-5000 miles depending on manufacture recommendation. should pay only 20-30 dollars (much less if you change it yourself)

SG from Germany
SG from Germany
9 years ago

You should sell the car. (But you know that already…) Listen what family and friends say, but be brave and make your own conclusions.

Side note: To me (as a European), 25 mpg seems like awful bad fuel economy. Even my 18 year old car gets something like 35-40 mpg.

jason
jason
8 years ago

some efficient cars might get 35-40 mpg “highway” driving i.e. constant 55 MPG, no stop and go. But the constant idling and stop and go of san francisco and golden gate traffic during rush hour, nothing would get over 30 except an electric or hybrid

Pamela
Pamela
9 years ago

GRS is such a great site because it realizes financial decisions are about more than money. Your question, Sarah, highlights the ambivalence we feel about making decisions just because they make sense financially. So take the finances out of the equation. You’ve already done an excellent analysis of that. Ask yourself a few questions: What kind of person am I? How do I see myself acting in the world? And does this person need this car? Or any car? If you see yourself as environmentally aware, for instance, the car share program might be a better fit for you. And,… Read more »

LifeAndMyFinances
LifeAndMyFinances
9 years ago

Much like J.D., I would suggest that you sell the car. It’s going to be such a freeing feeling for you! See how well you can do without it, and if you feel like you need some wheels, visit a used car dealership and purchase that beater.

If you get your costs down to around $200 like you suggest rather than $1,000, you’ll feel much better about your situation and can handle any emergency that may happen!

Good luck! 🙂

louisa @ TheReallyGoodLife
louisa @ TheReallyGoodLife
9 years ago

I love public transport and have never had my own car so perhaps I’m biased but for me, it’s pretty clear you should sell it. You know from a financial point of view that it makes sense – even if you car-share every single weekend, costing $75 a time, your car-sharing and bus fares will still be half the cost of owning your car – that’s an extra $6000 a year in your pocket. You’re not even losing money if selling it now – and you could put that money in a savings account and buy a cheaper car in… Read more »

kl
kl
9 years ago

Hi, I’d also advocate for selling the car but leaving the psychological opt-out: permission to buy a cheap old car (like $2000 one JD suggested) if you feel after selling the current one that not owning a car is a mistake.

Or, become a scooter gal. No idea how much they cost though 😉

Pat
Pat
9 years ago

If you still lived 40 miles away from work then a car would be a necessity, Now that you live close enough to take the bus to work, then you should sell it off. Hopefully you can get enough for the car that it completely covers what you still owe on it.

It will save you the stress of having to find a place to park and the stress of having to deal with the traffic.

lostAnnfound
lostAnnfound
9 years ago

I think you cannot afford to keep it. Sell it, take any $$ left over from the sale and buy a used car if you like the freedom and convenience of being able to just get in a car and go when you want or need to.

And I do not think you made a mistake when you bought the car. You obviously thought about the pros and cons of purchasing and owning a car and made the decision that was best for your circumstances at that point in time. Don’t let anybody tell you otherwise (including yourself) 🙂

Lauro Wolff Valente Sobrinho
Lauro Wolff Valente Sobrinho
9 years ago

Well, the point is: the car mustn’t be bought. Unfortunately you cannot go back, so looking forward, I do think you should put your hands on a pen and write down to a paper the following: Calculate how much you are going to loose if you sell your car now, instead of waiting some time. Calculate how much you are spending now with it, instead of selling it. Than just make a comparison. Is it worth selling? Yeah? No? If it is cheaper to keep it, keep it, if not, do not ever think something else. Forget about the-completely-wrong-saying: “can’t… Read more »

mlolez
mlolez
9 years ago

2 more things to consider –

1. How often do you shift cities for jobs and is it in your hands to move to a public transport friendly city?

2. Can you keep the car if you only use it for car pooling or simply reserve it for the non-work related transport (to teach swim lesson after work, to dinner parties, to events, on trips to Tahoe, on excursions)?

retirebyforty
retirebyforty
9 years ago

Sell the car and save up to buy a good used car with cash. You can live without a car for a few months and save that $1,014/month to buy a reliable used car. Who knows, maybe you’ll get used to not having a car again. You can join zipcar.

I’m sure your housing cost went way up when you moved into the city. You’ll need to reduce other expenditures.

Yeah, sunk cost. Money is gone so don’t throw good money after bad.

Barbara
Barbara
9 years ago

I have a 95 Escort wagon named Betty the Ford. I paid very little for her and since she only has 68,000 miles, she’s got an engine that will last for years. I’ve had to put about $2000 into her for some under body during the last two years, but my mechanic assures me that she’s in very good shape. Insurance on her is ridiculously low. If I had bought a new (or newer) car I would have been paying that yearly $1000 in 2 months instead of annually. A real bonus is that even though she’s a really attractive… Read more »

Tom
Tom
9 years ago

She should probably get rid of it, sounds like she’s already made up her mind. But I’d like to comment that there’s no way a 1-yr old car needs 4 tune-ups a year. Oil changes? yes. $100 tune-ups? No. Unless there’s something exorbitantly expensive about car maintenance in California, she should find a new mechanic for her next car.

Raghu Bilhana
Raghu Bilhana
9 years ago


Sarah

Immediately sell the car and go for public transportation. You are paying way too much for having the car.

The sunk costs are sunk costs. Dont worry about them. Sell it off.

Leo Babauta from zenhabits.com also lives in San Fransisco and he never had a car while in SF. He and his wife have 6 children. So if they all can get by without a car, so can you.

Alexandra
Alexandra
9 years ago

Hi Sarah: I think it’s great the way you have carefully laid out all the reasons why keeping this car does not make sense for you right now. It seems clear that you would definitely be better off without the high overhead costs of owning this car. I say sell. I understand completely that hindsight is 20/20, but I’m sort of puzzled by your decision to purchase such an expensive car in the first place? If your take home pay really is in the $3000K per month range, a better idea might have been to finance a cheaper used car… Read more »

John
John
9 years ago

It seems like you should sell your car, but it seems like you are overpaying for insurance and especially maintenance. A new car does not need a tune-up only oil changes…

Peter
Peter
9 years ago

I would sell the car and use the extra money you get (car value minus outstanding car debt) to make an extra down payment to your college debt. The money you don’t spend a month on car ($1000) you can partition in three sections: $300 on alternative transport (bike, bus, rental car, car sharing), $300 on extra pay off college debt, $300 for the emergency fund.
Just my two cents. I was able to pay off my college debt very quickly after I left university and that has given me much (financial) freedom.

Damsel
Damsel
9 years ago

You didn’t make a mistake in purchasing the car. You had to have it due to commuting. Circumstances changed and now you are throwing good money after bad. Take the leap and sell the car! Make a promise to yourself that you will try it for a set period of time (one month, three months, whatever). Make a note of all the times you REALLY wish you had a car… and not in an “Oh, it would be nice” kind of way. At the end of your time frame, go over your notes. If you need a car, go get… Read more »

Stephen
Stephen
9 years ago

Why not refinance and get a lower monthly payment until you find a buyer? My credit union offers 2.99% on 4 or 5 year pre-owned vehicle loan. Refinancing would reduce your monthly car payment in half.

I would suggest listing it for sale ASAP at a price that is more or equal to what you owe. Just be patient, it may take two or three months of driving it around with a For Sale sign or listing it on Craigslist or Ebay.

tim
tim
9 years ago

Think a couple of years down the road. You’ll be making that new-car payment every month for a pretty well-used car. Car payments become less and less worthwhile as your car ages.

Try this experiment. Find a place to park your car for a week (outside the city) and do without it. Then reevaluate.

bon
bon
9 years ago

Yes, sell sell Please, ignore this advice if you are in a very busy area or don’t feel confident about the safety!: I like the idea of a scooter for those dinners out and swim lessons, and a zip car for your Tahoe trips. The scooter won’t be perfect – i.e. if it is raining you may still ask for a ride or go with public transportation – but that will help bring you closer to a public-transit only mode. A used car is a good idea too, but I have a feeling every time you have a repair >$200… Read more »

Ben
Ben
9 years ago

It really sounds like you enjoy owning a car. There’s nothing wrong with that. You just don’t enjoy the high cost of this particular car. Sell the car, take any proceeds you make from it and perhaps set it aside for a while to see how things work out by not having a car. If after a few months you believe you would like to still have a car, just use the money that you made from the sale and buy one outright.

Charlotte
Charlotte
9 years ago

Why don’t you try going carless for a couple weeks? This will help you see how not having the car will affect you.

I think you should keep it if you decide you want it after that.

Nicole
Nicole
9 years ago

Only you can make this decision. Don’t disregard your emotions because they can give you information on your wants and values.

Why not try a week or two leaving your car parked somewhere and see how difficult life is without it?

And don’t forget zipcar– the best thing about zipcar is the dedicated parking spots.

Liz
Liz
9 years ago

I, too, bought a car specifically for a commuting job – then found a better job that didn’t require a commute. (At least while I lived in my old apartment.) It’s not a mistake if there was a clear rationale for the purchase, and you couldn’t foresee moving so soon after buying the car. Don’t feel guilty about using the money you earned for a valid reason. Anyhow, if the emotional/psychological part of selling back your car is getting to you, I’d suggest that you take a week or two to “test-drive” your new transportation: feet, bike, public transit, etc.… Read more »

Eric D. Greene
Eric D. Greene
9 years ago

I’m with JD on this – start looking around for an older car to replace your Matrix. You are spending too much every month just to keep it.

Anna
Anna
9 years ago

I’ve lived in four different states, traveled all over the country, go out fairly regularly, and have never owned a car. I take the bus or train everywhere that I can’t walk to. I carpool with friends who have cars are are going the same direction, offering them a bit of gas money if needed. In some areas, you need a car to get around. But if you are living in SF (which has some of the greatest public transit I’ve ever used), there is no need for one. Its a commodity, a convenience. Whether it be for financial reasons,… Read more »

Elizabeth
Elizabeth
9 years ago

Ah, Liz beat me to it! I was going to suggest a two week trial period or a month. I used to commute 40 minutes each way, and you’d be surprised what a big difference that is at the end of the day. When I changed jobs and the commute was gone, I had more time and energy for exercise, more time to plan and prepare healthy and frugal meals and more time to just unwind. However, a lot of people I know who take public transit love the opportunity to read or play on their smart phones as a… Read more »

Crystal @ BFS
Crystal @ BFS
9 years ago

It seems like you think you should sell your car more than anybody else, so go for it. No reason to make yourself feel guilty every time you get in it or see a bill, right?

Coley
Coley
9 years ago

Sell the car or keep it, depending on your lifestyle. But two points: 1. Your car should not have needed four “tune-ups” in its first year. Nowadays, a “tune-up” (new spark plugs) might be after 100k miles. You got taken for a ride there. Live and learn. Read the service schedule that came with the manual, and follow it. An oil change every 8-10k miles or so is likely all that’s prescribed, and this will run about $30. 2. Your accounting is a bit off. Specifically, the $529 monthly car payment is based on a three-year amortization schedule. But the… Read more »

MIKE
MIKE
9 years ago

@SG from Germany: Laws in the US have made the high mpg that many people enjoy in europe unavailable to us here in the US.

Money Smarts Blog
Money Smarts Blog
9 years ago

I like Nicole’s suggestion of parking the car for a couple of weeks to “test drive” the no-car scenario. 🙂 Financial decisions on elective choices really have to be considered in the context of your overall finances and financial goals – none of which you have provided. Are you short of money because of the car? What would you do with the saved money if you sold your car? Are there goals you can’t achieve because of the car? Two more points: 1) Buying a beater is a good way to get rid of debt, but it won’t lower your… Read more »

Kate
Kate
9 years ago

I’m with Liz#13

Wasn’t a mistake at the time but now your situation has changed and so you shouldn’t beat yourself up if you want to make a change in your transportation.

I also like the trial run. You may discover you’d rather have a car (but maybe not yours in particular.) Or you may discover you are just fine without one.

getagrip
getagrip
9 years ago

Well, I don’t think you made a mistake in buying it in the first place. The question is now how much value do you place in it. Life is full of “sunk” costs, like food, shelter, kids, education, clothing, etc. It’s the value you are personnally receiving for the money that’s important. So as others have mentioned I’d recommend taking a few weeks or even a month getting around without the car. Park it somewhere safe and away from you if possible and see how you manage. Like most things of convienance we get used to them and they become… Read more »

Barb
Barb
9 years ago

Before you decide, you need to test yourself. Spend at least one week getting to work without using the car. Make notes every day what you did, note the time spent on alternative transport, etc. Then spend a week using the car again making the same notes of time spent & other costs. If after the one week test you still feel you should sell the car but you have doubts, commit. Commit and execute a full month without using the car at all, for anything. After one month without it check again how you feel about the car. Sit… Read more »

Erin
Erin
9 years ago

I am always frustrated by arguments that you “need” a car. If you didn’t have a car, would you be unable to function in society? The answer is certainly a resounding “no”, especially in the Bay Area (where I used to live). So the only reason to keep the car would be if you *want* it, and it sounds like you don’t.

There are many alternatives, and I think you will enjoy the freedom from payments, worry, and the hassle of parking.

Kevin
Kevin
9 years ago

@Stephen:

Why would she refinance at 2.99% when she clearly said her current financing is at 0%? Why would you advise her to pay interest when she’s currently not paying any?

@Sarah: Sell the car and take the bus. Lots of people get around SF just fine on the transit system, you’ll become comfortable with it in no time. You’ve got way too much student loan debt to be spending 1/3 of your income on a car.

Carol
Carol
9 years ago

Great, thoughtful post. I agree with others that when you lived further away and didn’t have public trasportation as an option, car ownership was vital. Now having moved with public transportation, it’s obvious that the new car is a burdon. I’d throw an experiment into the mix of options: before selling the current car, go carless for one week-is it do-able for you? reflect on the carless experiment? does public transportation meet your needs? Next, sell the car, pay off the loan and breathe. Either put in the $2000 over the car loan into a better fuel efficient beater car… Read more »

Jessica
Jessica
9 years ago

Sarah, I disagree on buying a beater. That only saves you the car payment each month and maybe some on insurance. You would certainly have higher repair costs. The “$2000 beater” advice I hear all the time is tough to take unless you are a weekend mechanic or know a good one. You can often end up with more costs with $2000 cars and you still don’t have reliable transportation. Nothing like surprise $1000 repairs plus being nervous about taking the car to Tahoe because you are afraid it will break down.

Good luck.

Jan
Jan
9 years ago

Park your car at your parent’s for a month. Call the insurance co and tell them it is parked and will not be driven. See how you do. Your list of pros and cons can be on your fridge. It will also give you time to look for the zip car spaces and get used to public transportation. IF you sell (which I am betting you will) DO NOT buy a beater. A huge part of your problem is parking. I know- BTDT in a big city. Live without a car. You can do it if I could for two… Read more »

Jessica
Jessica
9 years ago

Deleted – error post

Lauren @ Pineapple Pizza
Lauren @ Pineapple Pizza
9 years ago

I don’t know whether you should sell your car either (although, I loved NOT having a car when I lived in D.C.!), but I will say that you might be surprised what you can find to do on a 40 minute commute. I live in a little town with a university that has a bus system and I could drive to campus in 5 minutes. My bus route takes 30. However, I *like* the bus because I get reading/knitting done that I cannot justify the time for otherwise. I also like the idea of getting a good used car. When… Read more »

Brian
Brian
9 years ago

Because you have other debt around $80K, it makes sense to sell it. I am of course puzzled how your car lost 43% of its value in 1 year. That seems a bit high to me, ut any case get as much as you can for it.

Mike
Mike
9 years ago

I don’t have that luxury since live in MA. I’m too far away from the nearest public trans. and I’m too far away from my job. It is a necessity during the winter months.

HollyP
HollyP
9 years ago

Before taking any actions, I have to ask: What are the chances that you’ll be moving again, or changing jobs? If there is more than a small chance that either of these events will happen, I’d hang onto the car a while longer. You have already expended the sunk costs, so you don’t want to find out in a year that you need to purchase another car and invest in the sunk costs again. If there is a chance of either, you might seek out a place outside the city where you could safely garage your car for a while.… Read more »

bon
bon
9 years ago

JD – this is totally off topic, but can i put in a vote for a commenting feature where we can “like” each-other’s comments, I think it would be great esp. for “ask the readers” posts. – for example, I’d like to agree with Nicole’s comment without having to make a second comment. Sorry for the tangent, pls go back to enjoying your vacation!

Kaylee
Kaylee
9 years ago

You should sell it. Do it quick before you can change your mind.

I was also in a similar situation 2 years ago. I missed my car badly at first but after seeing my savings pile up, I didn’t miss it as much anymore. Now it would be harder to try to get me to BUY a car.

JRR
JRR
9 years ago

Who the hell convinced you that you need 4 tune-ups a year? Modern cars are designed to go 100,000 miles without a tune-up. All you need is an oil change, and that only about every 7500 miles – anyone who says less is trying to sell you oil changes, unless you’re driving in extreme conditions like through sandstorms. I have a 14 year old car with 136K on it and I haven’t paid $1000 in maintenance total on it since day one, excluding new tires. $20 for an oil change every 7500 miles. Anything else goes wrong, it’s a new… Read more »

Chris
Chris
9 years ago

I would recommend against selling the car. If you can tough it out for 2 more years you will own the car outright and you can probably get at least another 7 years out of that car. Think about now nice 7 years without a car payment would be. If you really want to make a fact based decision though you should consider the costs of both alternatives. Public transportation is nice but it isn’t free (at least not in the greater Philadelphia area). So you should compare the cost (time and money) of both situations. Additionally, I agree with… Read more »

Jim 59
Jim 59
9 years ago

You need to work on the quality and timing of your analysis skills! First, you neglect sunk costs: so far so good. Next, you take old costs, which clearly are no longer applicable, and apply them to your new situation. Then, you neglect to address other uses – how do you get to the swim lessons and the dinner parties? You haven’t included bus, taxi, or car expenses for that travel. The Zip car needs fuel to get to and from Tahoe – not included. And, worst of all, you are conducting this analysis AFTER having moved to SF. You… Read more »

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