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Should I Sell My Car to Pay Off Debt?

by

JG Wentworth

May 6, 2025

5 min

Car with for sale sign in window

Overwhelmed with debt and looking for a fast way out? Deciding whether to sell your car to pay off debt is a significant financial decision that depends on your unique circumstances. Before you make any decisions, let’s walk you through some key considerations to help you make an informed choice one way or another… 

Understanding your current financial situation 

Before making any decision, take a clear-eyed look at your current finances: 

Assess your debt situation 

  • Which debts are causing the most financial stress? 

Evaluate your car’s value 

  • What is your car currently worth? (Check Kelley Blue Book or similar resources) 
  • Do you have equity in your car, or are you underwater on the loan? 
  • How much could selling the car realistically contribute to debt reduction? 

The potential benefits of selling 

It’s entirely possible that selling your car could help get your debt relief ball rolling. Let’s first take a look at why this could be a smart move: 

  • Immediate debt reduction Selling your car can provide a lump sum to significantly reduce or eliminate high-interest debt, potentially saving thousands in interest payments over time.
  • Lower monthly expenses Without car payments, insurance, maintenance, gas, and other car-related expenses, your monthly budget could free up considerably.
  • Psychological relief Getting rid of a substantial debt burden can provide immense mental and emotional relief, reducing financial anxiety. 

Important considerations before selling 

On the other hand, let’s play devil’s advocate and look at why selling your car to pay off debt might not be worth it: 

Transportation alternatives 

  • How will you get to work, school, or other essential locations? 
  • Is public transportation available and reliable in your area? 
  • Could you use rideshare services, bike, or walk to destinations? 
  • Would buying a less expensive car be feasible? 

Lifestyle impact 

  • How dependent are you on your car for daily activities? 
  • Do you have children or other family members who rely on your vehicle? 
  • Would selling create significant hardships that outweigh the financial benefits? 

Future financial implications 

  • Will selling now save more money than keeping the car long-term? 
  • What are the costs of potentially buying another vehicle later? 

Running the numbers: A practical example 

Let’s work through a basic example to give you an idea of how this could play out: 

Current situation: 

  • Car value: $15,000 
  • Credit card debt: $12,000 at 18% interest 
  • Monthly car expenses: $500 (including payment, insurance, gas, maintenance) 

If you sell your car: 

  • Pay off car loan: $10,000 
  • Apply remaining $5,000 to credit card debt 
  • Credit card debt reduced to $7,000 
  • Monthly savings: $500 from eliminated car expenses 
  • New transportation costs: Varies (perhaps $200/month for public transit/rideshares) 
  • Net monthly savings: Approximately $300 

In this scenario, you could use the $300 monthly savings to pay down the remaining credit card debt much faster, potentially saving thousands in interest. 

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When it makes more sense to sell 

Selling your car to pay off debt makes the most sense when: 

  1. You have high-interest debt that’s causing significant financial strain. 
  2. Your car is worth more than you owe on it (positive equity). 
  3. You have reasonable transportation alternatives. 
  4. The financial benefit outweighs the lifestyle adjustments required. 
  5. You’re spending a disproportionate amount of your income on car-related expenses. 

When keeping your car might be better 

On the other hand, keeping your car might be wiser when: 

  1. You live in an area with limited transportation options. 
  2. Your job or family situation requires reliable personal transportation. 
  3. Your car payment and expenses are relatively low compared to your income. 
  4. You owe more on your car than it’s worth (underwater on the loan). 
  5. You could address your debt through other means (debt consolidation, balance transfers, etc.). 

Alternative strategies to consider 

If selling your car doesn’t seem like the right move, consider these alternatives: 

  • Refinance your auto loan for a lower interest rate or extended term to reduce monthly payments. 
  • Downgrade to a less expensive vehicle to reduce your car payment while maintaining transportation. 
  • Use a balance transfer credit card with a 0% introductory APR to temporarily halt interest accumulation. 
  • Create a debt snowball or avalanche plan to systematically pay down your debts. 
  • Consider a debt consolidation loan to simplify payments and potentially lower interest rates. 

Making your decision: Next steps 

If you’re leaning toward selling your car to pay off debt: 

  1. Get an accurate valuation of your vehicle. 
  2. Calculate exactly how much debt you could eliminate. 
  3. Research transportation alternatives in detail. 
  4. Create a concrete post-sale financial plan. 
  5. Consider consulting with a financial advisor for personalized guidance. 

The bottom line 

Selling your car to pay off debt can be a powerful financial reset button for some people, while for others it might create more problems than it solves. The right decision depends entirely on your unique financial situation, lifestyle needs, and future goals. 

The most important step is conducting a thorough analysis of both the financial and practical implications. Take your time with this decision, gather all the relevant information, and choose the path that best aligns with your overall financial wellbeing. 

There’s always JG Wentworth… 

If you have $10,000 or more in unsecured debt there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:  

  • One monthly program payment 
  • We negotiate on your behalf 
  • Average debt resolution in as little as 48-60 months 
  • We only get paid when we settle your debt   

If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?  

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* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.

Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.

This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that you consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.