How to Sell an Upsidedown Car

Automobiles represent one of the largest expenditures in our household budgets, second only to housing. The costs of driving a car don't stop with the monthly payments, but include insurance premiums, gasoline, tires, general maintenance and costly repairs. One of the most significant, forgotten costs of buying a new car is the depreciation expense.

Cars go down in value like a rock (where do you think Chevy got the tagline?). New cars can lose as much as 30-40% of their original value in the first two years, leaving many people owing more than their car is worth. If you find yourself in this upside down status chances are your situation could be greatly improved if you sell that "new" car and buy a $2,000-$3,000 used car to get back and forth to work.

The first step in selling an upside down car is to get a good valuation figure to work with. Kelley Blue Book (kbb.com) offers a great online service for looking up your used car's value, taking into account mileage, options specific to your model, and the overall condition of your vehicle. Be honest with yourself when assessing the condition of your car. If your kid spilled grape juice all over the backseat upholstery don't list the condition as excellent. You get the idea.

Always look for the "private sale" estimate. You can almost always get more out of your used car selling it to an individual than trading it in at a dealership, or selling it to an auto wholesaler/reseller such as CarMax. Advertise in your local credit union bulletin or newspaper, and stick a For Sale sign in your window when the vehicle is parked.

If you find yourself in the unfortunate position of owing more than the value quoted, consider financing the difference. If your car is worth $15,000 and you owe $18,000, it's much better to sell it and owe $3,000. Yes, you still have a debt associated with a car without having the car, but better to owe $3,000 than $18,000. With decent credit you should be able to finance this difference, and if you don't have any cash sitting around for another car, you may want to add $1,500-$2,000 to this figure to include your new (used) car.

Bottom line, quit sacrificing your financial future for the opportunity to impress people at a stop light. Cars were designed to transport us from one location to another. Despite popular opinion, they don't make us look any better or make our lives any richer. Remember, Sam Walton, one of the richest men in America at the time of his death, still drove his 1979 pickup truck.