Tim gives some counsel to young people about how to best use the money God has given them when buying a car. A day is coming when we will have to turn in an account of the way we managed the possessions that were given to us.
Someone asked, “I was watching one of your youtube videos on purchasing a car. I wanted to know if I should sell it I bought it brand new off the lot last year. I know you must be very busy however I still want to see if you could crunch some numbers for me?”
The way to evaluate the numbers is this: [but bathe it in prayer and ask the Lord to help you get out of debt…it’s amazing how He helps His people when they are striving to get out of debt in order to please Him.]
First, how much do you currently owe on the car? You should call you bank and ask them what the current payoff amount is.
Second, how much are you paying each month for car insurance?
Third, what is the Kelley Blue Book value of your car? When calculating the Kelley Blue Book value it is very, very important that you include every option that your automobile has. You also want to make certain that you put the exact series of automobile. Sometimes there are various versions of certain automobiles. You also want to put in the exact mileage. And you want to make certain that you are getting the value of the automobile if you sell it privately to someone…you do not want trade in value, or any other sort of value…only the amount you ought to be able to sell the car for if you do a private sale.
The Kelley Blue Book value is only an average price that a car like yours ought to be able to be sold for in the same condition as yours…but it is only an average. Many cars sell for more than the Kelley Blue Book value.
Forth, once you have the Kelley Blue Book value, you might want to run by a CARMAX if there is one in your area and find out what they would give you for the car.
At this point, you ought to have a good idea about what you can get for the car if you decide to sell it. You also know how much you owe. If there is a difference and you owe more than the car is worth, you then need to ask yourself if you have funds to cover the difference. If you sell your car, you will need to pay it off in full…so if you sell the car for less than you owe, you will have to come up with the cash to cover the difference.
Let’s say your bank tells you that if you were to pay off your car today, you would have to pay $20,000 and let’s say you are able to put your car on Craig’s List and sell it for $18,000. You obviously would have to come up with $2000 out of your own funds to pay the car off.
But just remember this…if you are paying $400 per month for the car and you are paying an additional $80 per month for full coverage car insurance…that $480 per month expense will stop the moment you pay off the car. In just a little over 4 months, you have broke even on the $2000 you had to produce out of your own funds to pay the car off.
Of course you will also need to buy a used car…and I recommend only carrying liability insurance which is considerably cheaper insurance. But even if you pay $4000 for a car and have to pay $40 per month for liability insurance, in about a years time, you will have broken even and will now have a paid for car and no car payments.
Hope that helps.