Cardinal syn??

debtfreeby2013

I was well on my way to clearing my credit card this year with a handy insurance pay out from a road accident which would have meant with a bit of hard work and effort I could have cleared my Lloyds loan by the end of the year (I still have my student loan but just relying on that coming out with my pay for now) BUT my car started throwing a few wobblies and would have cost about £400 to repair. I need a car for work as I travel approximately 6000 miles a year with work so started looking for a new car. I have bought a 12 plate Clio for £8291 (it was £8991 but they gave me £700 for my car), paid £400 deposit out of my saved money and took advantage of a 0% interest offer on the credit card for the other £7891.

Have I made the cardinal sin in buying a car on the credit card? I know people say about saving for a lesser value car but with free servicing, no MOT and 4 years warranty on the new car plus the fact that my last car lasted 7 years so if I could do that again I calculated that it is the equivalent to £600 a year. I have no other debts and approximately £900 a month disposable income so am thinking of paying £300-£400 a month off the card meaning I can clear about half of the debt by next May when the 0% offer expires then attempt to transfer the money to a different 0% card (if possible) which will give me a bit of breathing space with the repayments and if not just keep piling the money on at a rate of £300 to £400 a month. What does everyone reckon? Savvy choice or misguided debt addict?

claret_mike

I think you have done the classic self justification that gets people in a mess to start off with personally.

You have worked out that your new car is going cost the equivalent of £600 per year if your car lasts as long as your current one and only things covered by warranty go wrong so that is somehow good value as it will cost £400 to fix your current car? Have you considered servicing costs for the warranty and tyres etc.

You have paid on 0% so that is a positive I guess if you are going into debt for it but I think 6k miles a year equates to about 16miles per day/500 miles a month. This is nothing and imo not worth buying a car of that value.

Another way of looking at it the £400 per month you are going to put towards the car is that it is costing you £1.25 a mile before fuelling, maintenance etc.

I would have thought the sensible way to do it would have been to pay £400 and keep your current car, paid your £900 disposable income and clear your existing debts over the next 4-5 mths and then start saving - if your car went again then see what you had saved and what it would cost to fix again - with the kind of disposable income you have it would not have been long before you could have afforded to buy your car outright without need to use credit card.

debtfreeby2013

Yeah I totally see what you mean.

The 6000 miles is purely work related (and is an estimate based on my previous part time mileage increasing) and as for the £400 to fix the car, that was just the current problem (abs problems) but my clutch was also going (£150-£200), suspension going (£200) and various minor problems such as engine mounts and cam belts. So as the market value of the car was only £700 it is pretty bad economics to spend over £1000 on repairing it over the mext 12 months.

The other side of it is that fuel wise I am actually spending nearly half as much (dropped from £200 a month to £120) by changing cars due to improved mpg.

My total mileage over the year will probably be close to 15000 and tyres would be a cost that I would have to factor in whichever car I had (same siz and type so same cost on both cars).

I dunno, maybe I am kidding myself and trying to convince myself that I made the right choice because it is quite hard working for 9 years to get so close to paying off all debt only to whack it up again but this FEELS different if that makes sense. I don't feel like I'm in a position where I have to take credit to dig myself out of a deeper hole but because it was actually the best decision economically but maybe, as you say, I am kidding myself.

harrys_dad

If you are doing 6000 miles a year of "work related" mileage are you getting any fuel allowance for this? Have you got Business Use on your insurance?

On your wider question, you have already made the decision so what is the point of asking if it was right or wrong? if we persuade you it was wrong it cannot be reversed anyway.

simeyb

IMHO I wouldn't have done what you did. I would have patched up the existing car, paid off any other debts and simply saved for a replacement - putting debt onto a 0% card is exactly what the lender wants, because unless you can be a true rate tart and have the means to pay of the whole of the debt before the 0% rate expires (which you probably don't) the lenders know that you will end up paying them loads of interest.

As another post has pointed out, this is all very interesting but it looks as if you have already done the deed? If you have, please don't look at Parkers and see how much your new shiny car is worth part-ex already as it won't be what you have paid for it - although better than buying brand new. If you haven't done it you should perhaps think again - £8.5k on a card is alot.

Cycrow

6000 miles doesn't seem like a lot.

i do about 4000 miles a year on my bicycle commuting to work.

if it was me, i think i would have paid the £400 to fix the car, clear off the existing debt, then think about getting a new car.

adding more debt onto existing debt is just asking for trouble if something bad happens, like you end up losing your job or something

emmaglet

If I were you I should have paid £400 to repair the car, but I probably would have got another car tbh. My car is getting old, the last MOT cost me mega money, not to mention the higher tax, fuel usage, etc and I really need to consider a new car when the MOT and tax are due.

At least it is on 0% and you won't have the worries of your car breaking down, repairs, etc.

cats2012

How long is it 0% for? That's also an issue as if you can't clear it you'll need to be able to get a BT card with a bit credit limit and pay the fee (often 3% ish) in however many months time.

blitzboy

cats2012 wrote: »

How long is it 0% for? That's also an issue as if you can't clear it you'll need to be able to get a BT card with a bit credit limit and pay the fee (often 3% ish) in however many months time.

Ends next May, as stated in the OP. They also plan to transfer the remaining balance, as stated in the OP.

OP, personally I would have gone for a fixed rate loan for something this big (if I bought it on credit at all), but if you are disciplined with it and are successful with the balance transfer then it can work this way too. However if you aren't able to transfer the balance in 12 months time then it could prove costly compared to a loan at say 6%.