Sell My Car to Fund an Emergency?

Photo by Cohdra via MorgueFile

I was thinking about this last night: if I were to lose my job, could one of my paid-for vehicles be used as an emergency fund?Let’s see…our family has two vehicles: a 7 year old four cylinder sedan with 120,000 miles, and a 3-4 year old Ford Escape with about 50,000 miles. Both are paid off.

In checking their resale values on Kelly Blue Book, I see that I could probably easily sell the Ford Escape for $10,000, no problem. Granted, it is worth a few thousand more, but if we were in an emergency scenario like a job loss, I’d probably take the easy cash first.

I believe I have enough in our emergency savings to get us through a month or two, which could, theoretically, allow me to try to get a bit more for the truck before accepting a crazy price.

While it wouldn’t be fun to have only one car, if I lost my job, I would have to pull our daughter from her childcare and watch her at home, but wouldn’t need a vehicle. If there was an emergency, I could probably sprint to the prompt care clinic in under two minutes (very close to my house).

If I had a job interview, I could probably arrange a ride, or take the bus or a taxi. In reality, having two vehicles is really a luxury, especially if you are facing job loss.

This is why paying off debt is such a valuable thing. Not only are two paid-for cars two payments we don’t have to worry about when facing unemployment, the debt that was the car payments has actually been turned into an asset. By selling off the car, we get a one-time cash infusion that could probably feed my family for a year. Also, I wouldn’t have the added expense of gas, insurance and maintenance, saving us even more.For the first time, I am looking at our paid-for car as an asset. I’ve mentioned in earlier posts that I view cars and vehicle purchases as the easiest way to NOT get rich. I’ve watched family and friends (including myself) blow so much money for the privilege of having a nice car, and I almost cry thinking of the $45,000 we’ve spent over the past 5 years on vehicles.I don’t love either vehicle. I am grateful for my car because it was a commuter, and saved me a lot on gas. The Escape was a purchase we shouldn’t have made. We just took a look at my wife’s old car payment then found the best vehicle we could get for $100 more per month.We were looking at vehicles as necessary evils. It never occurred to us that we could live a life with no car payment. And maybe it can be done. Right now, we are not putting money aside each month to replace a vehicle when one of these craps out. Maybe that means, no matter what, a vehicle payment is a near impossibility to escape.

But in seven months when we’ve paid off everything but the house, we would have the option to start putting a few hundred a month into a dedicated fund for vehicle replacement. Because if you aren’t saving for your NEXT car, you have another debt time bomb that could potentially get you.

That is, unless you don’t mind driving a $1000 beater.

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23 thoughts on “Sell My Car to Fund an Emergency?

  1. You have a Ford Escape too hey? So do we.

    Interesting idea. You sure got me thinking. We have an ER fund right now which would be used in a job loss but it not yet at the level it needs to be. Maybe we would sell a car . It has some perks and your right- is two really necessary? Probably not.
    Miss T @ Prairie Eco-Thrifter recently posted..Imagining Your RetirementMy Profile

    • Hey Miss T – our Escape has been good so far, but I do kinda regret buying it. I used to view it as a major liability, but now I almost consider it an asset.

      If you can get past the “sunk costs” feeling (the “yeah, I paid $25k for it, but I would sell it for $10k” issue), you can think more logically and clearly about the future without letting the past hold you back.

      Thanks for stopping by.

  2. You may also find that there are other material things in your live that can be sold in a pinch if you need money that exceeds your emergency fund savings. Of course, if you are worried about exceeding your emergency fund’s limits, then you may not have a large enough emergency fund to start with. Great thought provoking post!
    Hank recently posted..Seven Car Insurance Myths You Need To KnowMy Profile

    • I’m actually jealous that you are able to live as a one car family. It would be hard for us to do, as we both work at different start times. A job loss would make it easy for me to convert, but would make everything else suck.

  3. It might work… but I guess the problem is you need to set the price pretty low to guarantee a quick sale. Also, if you lost your job, you might not feel like you have the ability to negotiate hard – so there are two factors working against you getting the best price (I’d also bet on selling it for less than KBB price).

    But yes, in an emergency a car is something that you might be able to sacrifice. However, I’d prefer the flexibility (and liquidity) of a savings account, possibly with a taxable brokerage account backing it up. YMMV (pun intended!).
    PKamp3 recently posted..Uncle Sam the CEO: Visualization of IRS Revenues Collected 1960-2010My Profile

    • You are correct, PKamp, would have to let it go cheap in order to make it work. I would be prepared to sell well below KBB. Can’t wait until I’m out of debt and have a real, long-term emergency savings plan in place. Thanks for stopping by.

  4. Interesting concept on the emergency fund. I guess the one thing I would be worried about is the change in value of the car. What if it is suddenly totaled in an accident or breaks down? Then the “emergency fund” aspect of it isn’t so valuable. It’s always going to be best to have the emergency fund 100% liquid, but there may be some room for creativity once you already have a few months in cash savings.
    Jeffrey recently posted..Goals for Quitting My Job in 2012My Profile

    • Spot on Jeffrey. I put myself into the mindset of ‘what would I do if I lost my job today’ and this came to mind. A real emergency fund is preferable. I think this is a way that I can actually view the vehicle as an asset, now that it’s paid off. I was so used to the mindset of hating the car payment and viewing it only as a liability.

  5. We are a one car family at the moment, but we are saving for a second used car. My husband’s job situation changed and while he won’t need a car for about six months, I don’t want to get a loan either. hopefully we can get enough saved.

    We were really stupid with buying new cars every time we paid off a loan. I want to cry at our stupidity too. I will probably never buy a brand new car again.
    Niki recently posted..A Financial Five Year PlanMy Profile

    • It is painful when you think about how much you’ve spent on vehicles. I’ve probably spent $50 grand on cars and you’d think for that I’d have a Corvette. Nope, just a 4 cylinder sedan.

  6. Sure, when you don’t have a job, an asset that requires inputs (such as insurance) is actually a liability. I remember a friend in college who in a job loss situation, sold his car and replaced it with a small motorcycle. Still able to get around, just got a little damp sometimes in the rain.
    101 Centavos recently posted..Travel Journal: Brazilian TrafficMy Profile

    • It can be surprising how much a paid-for car actually costs (gas, insurance, maintenance). I don’t trust myself on a motorcycle, but I could see myself on a scooter – thanks for stopping by

  7. We did the one car thing for about two years. We sold the car that usually sat in the driveway all day, so it wasn’t missed too much.

    I’m a stay at home Mom and at the time had a newborn and a 2 year old. I wasn’t venturing out to too many places with them, so it made sense to sell the car and use the proceeds towards paying off credit card debt. It also saved us quite a bit of money in insurance over those 2 years.

    We eventually went back to 2 cars when our finances were in better shape, our kids were getting older and Hubby took a job that wasn’t as close to home.

    Since I know we did it before, it gives me confidence that we could get by with only 1 car again, if we really needed cash because of job loss, etc.

    Thanks for sharing – it’s definitely something to consider!
    Mary recently posted..Kindle ebook Freebie: Organized SimplicityMy Profile

    • Hey Mary, glad you stopped by. I’m glad to see that you went for it with one vehicle and saw that it was something that was doable. My wife and I were just talking about other ways to trim spending in case of job loss (so expect a post soon on that topic) Hope to see you again.

  8. John, I’m almost 30 and I live in my mum’s house (because she’s never in the country so I basically house-sit). I don’t think it’s pathetic, I suppose it’s the accepted norm on the island-country where I live. Here, people only get their own house when they’re married. I’m saving up for a car because it’s a lot easier to get one, but I don’t see a car as an asset at all. Sure it has value, but I think of it as a luxury more than anything. Do you think it would not be wise for me to save up for a car, and should I be saving up for a house instead? In my country, a small house costs about 10-20 times the cost of a car (the cheapest car being about $10’000 for a second hand)…but a house is an obvious asset.
    Sabrina Sabino recently posted..The Blog Challenge: April GoalsMy Profile

  9. Great article, great game plan. In my view, the primary purpose of a car is to get to work and back. No job, no car.

    I actually take it one step further. I refused to lease or purchase a car until my student loan is paid off. I negotiated a carpool deal with a colleague to get to work each day (very minimal cost compared to owning my own vehicle). Once I have paid off my student loan I may consider leasing a car. Ideally, I would simply save up the extra cash…

    Marcel @Parkmycash recently posted..Introducing JSN EpicMy Profile

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