Would you sell your car if...

[teaandcakeat8]

I have a car which isn't on finance but it has an outstanding loan. I purchased it with a bank loan which has a 3.2% interest rate.

I've just moved to London for work and I don't need the car anymore. I can't drive it to work so it sits on my driveway all day, costing me £400 per month (with insurance etc) plus the occasional service, maintenance.

If I sell the car; I'll be left with a debt of approx 3k left on the loan. I'll easily be able to pay a huge chunk of the original loan off, reduce the the monthly payment to £90 plus save another £400 on top.

If I keep the car, I'll have to keep paying into it but obviously it will depreciate and I'll probably have an asset worth maybe £4K in 5 years.

So sell car - save 400 per month for 5 years - =24k

Or keep car, pay loan off and maybe end up with an asset of 5k?

My head says to option a. It will leave me the debt but I can obviously pay it off with the savings if need be - I'd just rather have the cash saved.

I have no other debts and own a house already. Is this is a sensible thing to do?

Definitely sell the car if you don't foresee using it even in the next 3/6 months. It's just costing you in running costs and depreciation for nothing.

If you're circumstances change, eg the London job doesn't work out and you move elsewhere and need another car, you can then just buy another one.

Thanks for the reply, I guess I'm just concerned about having the debt hanging over me if that makes sense? As I won't make enough to pay off all the loan...

I too think it's a no brainer to sell the car, if it will make a difference to the loan repayments ? I thought that most bank loans agreed a repayment term and penalised you for paying off early ?

It will make a difference either way as if I sell I'll have the cash in the bank to make the monthly repayment from - therefore saving me the monthly cost.

E.g. Monthly car payment is £280 - shortfall from loan over 4 year term is £3000/48 - roughly £80 per month? So I'm making at least £200 per month plus the cost of insurance which is over £100 per month!

So I can either sell and pay a chunk to reduce the payment or keep the cash in the bank and use it for the monthly repayment if that makes sense.

I'm 99% sure I won't be penalised for paying early anyway.