Debating the merits of taking out a car loan

GuitarGuy

So long and short of it is my car has been causing me no end of hassle over the last 12 months and almost everything has been replaced at this point, only thing left which may go is the engine..... The history I have with this car I need to be rid of it asap. That said its just mitigating risk now, far as I can tell its in better condition than it was 40k miles ago (purely based on the amount of things fixed this year).

Im sick of the car as is and am looking to get rid of it, was a few hundred short of my target to change the car when a few weeks back my gearbox disintegrated and so i was left nearly a grand out of pocket once more.

I was considering taking out a loan to cover changing my car asap, as a student my income really isn't that great. That said I live with my parents and pay no rent or bills (Term time too, live in the same city as I study term time anyway, reason for needing the car is that I help dad out running the family business when I can so weekends, school holidays ect ect and that requires me to go at crazy hours and also occasionally to do deliveries, aside from that I live about 6 miles from uni and have a bus service thats too unreliable to get there on time). As far as I can tell I've got two options;

1 sell my car in october when i get my student loan payment and just combine the two to change then.

2 find a loan and sell my car sooner. Already very sure what i want to change to and the fuel, insurance, tax is all accounted for.


Unlike last time i plan on sending someone over from the AA (They do me a deal as between me and my parents we have 30 years gold membership on the account so they said they'd do it for 25 pound for the highest level inspection) to get an engineers report before buying to avoid as much of this trouble as possible.

The budget i set myself is 4,500-5,000 for the car, my car is worth between 2,750 and 3,250 so Im looking for around £2000 for 12 months.

Any advice would be greatly appreciated.

CLAPTON

easily get a decent car for 2,750

Puddylove

Do you have an income at present - and how much of that are you managing to save each month?

If you have little income, you may struggle to be accepted for a loan.
And If you aren't saving any, then that would suggest you have no spare cash so may not be able to make repayments on any loan you do get.

Using your student loan to buy a car seems a bad idea; what will you live on?

Could you not keep your car for another year or so, and save the £200 (maybe save £150 or £200 each month?).

Nasqueron

Thought about riding a bike to uni for free fitness and save fuel money as well?

Just a side thing on the car, if you flog it, what if the buyer wants to see service / repairs history and sees all these problems with it and wants to knock £500+ off the price you think it's worth?

GuitarGuy

Everything is new, surely that adds value? Not sure on the logic there. Its 104k miles now so the repairs and new parts make it better than other cars with the same milage in theory? In addition to this I already have someone interested if i sell it. The guy owns a takeaway (a friend of dads) who is after a cheap run about incase he needs to do deliveries so he doesn't rack up millage on his daily driver.

As for riding a bike? It rains in this country, no thanks :P

Decent car yes, one which id be happy to keep for 2-3 years no, not for 2750. Id basically be buying a similar car to what I already have which to me is equal to illogical.

As for keeping the car another year, its not completely off the table but after all I've been through in the space of a year with it, I just want rid of it.

In terms of spare cash, I do have cash left at the end of each month, I earn around 600 a month at present from working at the business, aside from that i have student loan payments which have no direct outlets to be spent on as i live at home rent free and don't pay any utilities, my only costs are my phone bill my gym membership diesel and car insurance (paying monthly this year but will be annual from January). Usually I'm left with 350 at the end of the month, hence id managed to save up 1100 pounds.

I know I can afford a loan. Ideally I was hoping for one which would be easy for me to be accepted on which I can pay off early when i get that student loan payment without hassle and in the unexpected event of needing to pay the excess for the insurance or a big repair job, one i can pay a little extra per month to be able to freeze payments for a couple of months?

Does such a thing exist?

bigadaj

This seems like a crazy situation to get a loan. Your income is limited so will struggle to convince lenders that you can afford an loan, look like a fairly high risk meaning rates will be higher, but then say you can save a fair but, which leads to teh obvious solution of keeping the car and saving and then swapping when you have the cash difference.

Also better to keep with the money you've spent or you're losing on the sale, paying soemone else's profit on the new car and a car at £5k could well have significant problems, through wear and tear so no comeback if soe things net wrong soon afternoon you bought it.

Prepare to get a bit of stick for the gym membership, surely a luxury on a limited income, and your last question just brings us round full circle, you should be saving and paying yourself the interests rather than the finance firm.

ViolaLass

We bought our Honda for £3k. It's done 2 years so far with minimal work and seems happy to do at least another one.

iolanthe07

OP, surely, having spent all this money on the car, you're better of keeping it. You will never see the near grand you spent on the gearbox back if you sell it, never mind all the other things you have replaced and repaired.

jellie

Whilst understandable that you want to get rid of the car, you said you've pretty much had everything replaced. You'll never get back the money you've spent on it.

You could pay thousands for a newer car and still end up spending money on it. Then you'll be paying for both a loan and repair bills.

Better to keep it and save the money you say you can afford to repay a loan with.

GuitarGuy

Income really doesn't feel tight to me, as i said I'm left with £350 quid a month plus the cash from student finance, all in all it works out at about £8700 disposable income annually. Thats having already paid for insurance and fuel,as well as the gym membership and other stuff.... How that classes as low income I don't fully get. It works out as an average of £725 left at the end of each month, now I'm going to turkey in august for a wedding so need to be taking £500 with me for that, but aside from that its just repair bills and other student life stuff that I can cut back on quite easily, but 3 months is a long time to sit at home really.... Only reason I'm in this position is the fact that my current car has been so unreliable. In terms of keeping it at this point being a better economy, I've wanted to get rid of it for a long time as firstly, despite having done 22,000 miles in the last 12 months in it, i cannot for the life of me get comfortable in it, chronic back ache, secondly i feel I'm always having to rev it to keep up with traffic and as someone who does a fair bit of millage its a pain to contend with that all the time. Thirdly its not big enough for when I need to pick family members up from the airport, i end up having to pay 50 quid on temporary insurance every time to borrow dads car while he uses mine for that day.

The issue of to sell or not to sell is a 100% certainty. I am getting rid of it and that element is final.

Its just funding the rest of it now.

£725 a month is disposable at the moment, that being the case a loan with repayments of £200 - £250 a month really isn't going to hurt all that much I don't suspect. Plus my cousin and I regularly lend and borrow money from each other so in the event of something happening i have a secondary point of back up.

Gaz83

Presumably if you have £725 disposable income each month you've already got a fair whack in savings?