Sruggling to make a decision on future savings vs new car

danlightbulb

Hi all,

Not sure that this is the right section for this, but there isn't a section which fits exactly what Im asking and I had some excellent advice here a few months back. A quick overview of my situation:

1. I have recently had the ability to save between £400 and £500 per month, but have only just started doing this, so savings are only very small at this moment, but they will grow by this amount each month if I just stay as I am right now.

2. I have approx £10k of CC debt which is all at 0% and which I'm paying off at the rate of around £200 per month.

3. I do not own my own house, rent at the moment and have no deposit for one, having only just started saving. The savings I have started making will in 4 to 5 years allow me to get a very good deposit.

4. My car is 12 years old and has done almost 200,000 miles now. I would like a new one.

So the dilemma I am in, and asking for advice on, is what to do, because I genuinely cannot decide.

If I was to just keep things as they are, minimise my outlays, and keep paying off the CC, I could potentially save around £5k per year, or £20k over 4 years which would make for a significant house deposit. At the rate of £200 per month I will also have paid my CC debts off in around the same time period.

But my car is getting on a fair bit now, and I would like a new one. If I was to sacrifice some of the savings I'm making, and assuming I could get a bank loan for £8k, I could get a good quality used car for that amount which would cost me around £150 per month over 5 years (at 3.5% interest rate).

But by doing this I reduce the amount I can save by £150 per month which costs me £7,200 in total savings after 4 years, a significant amount to contribute to my house deposit.

I am really stuck.

Its obviously desirable to me to trade in my old banger for a newer car, but that costs me savings in the long run, and buying my own house is clearly an important goal. But 4 years is such a long way away.

I could just continue saving and get another older car if my current one gives up on me. I guess that is the thrifty thing to do. But then I find myself saying well only £150 a month is fairly reasonable and I would still be saving between £250 and £350 each month which is still fairly reasonable.

Any advice guys?

Thanks
Dan

DCFC79

First of all what's your salary ?

You might be lucky to get a loan as you already have 10k worth of debt as it is.

danlightbulb

Its 40k. But i pay child maintenance which takes around 20% off that straight away, and live alone so bear all the bills on my own too.

Puddylove

So, you're on £40k minus £8k child support = £32k.

You owe £10k which is 'still' on 0% but presumably won't be forever, and are only paying £2400 so will be indebted for 4yrs more at least.

You rent, and are therefore subject to the whims of your landlord, perhaps having to move with the need for a deposit, moving costs etc at short notice.

Presumably you don't have much of an emergency fund.

And you want to spend £10k (borrowing another whopping £8k) on a car?!

I'm in a similar position, except I earn £50k +, have only £6k debt, have no children, have an emergency fund. I rent, but have saved a deposit.

My car is French, 10yrs old, 150k mileage.

Hell would freeze over before I spent a huge £10k on a car. I understand that you want one, but suggest you consider saving a couple of thousand to buy a used car in cash, while you get yourself in a stronger position financially.

Use the idea of a shiny new car as motivation to pay off the debt/save. Split your savings into 'car' and 'house deposit', and you'll see the totals rise.

P x

danlightbulb

I've been looking at used cars around the £2k price range. I could save that up in 4 to 5 months. But they are all as old as mine, mileage fairly high. I may as well keep mine in that case. I'm only interested in replacing my car if I can have something modern, hence £8k to £10k being needed for it.

My emergency fund, having only just started it, is low. But in 4 months I will have £2k in savings, as I said.

A £10k loan at 3.5% over 5 years would cost me £12 a month in interest. Its so cheap, hence why wait, is what I can't help thinking.

But I could keep my current car and live with having an old car and not get myself indebted further and save more money each month.

I feel that the current debts are under control now. It hasn't always been that way until recently. I could divert more money to the CC if I wanted to now, at the expense of saving it, but as its on 0% there is no point. I have free space on cards to enable me to do 0% balance transfers again in 20 to 24 months when the current offers expire.

Its just this balance between how much to save and whether to get the new car.

Puddylove

To me, £18k of debt on a £32k (after child support) is a lot, 0% or not.

Do you really want a shiny car so much? At the end of the day, it's your decision, but I've often regretted giving in to my inner wants.

Imagine yourself driving the new car in a month - will you still be happy, or will you regret it?

P x

danlightbulb

If I was sure I wanted it I wouldn't be posting here probably.

Can I live with my current car - yes - as long as it doesn't start giving me any trouble.

Do I still keep looking at modern cars with 200 bhp and wanting one. Yes.

Do I want to buy a house in 4 years when I'm 40. Yes. My future depends on that.

Puddylove

Oh, I understand perfectly. I'm friends with a lot of petrol heads.

What I'm doing is saving £200 a month in my car fund. My car passed its MOT last month, and I'll keep it going until it needs significant work done. At that point, I'll see how much I have saved, what I can get for it, and make a decision. And every month that passes, I pay £250 off my debt, and save more towards a house, too.

There's a certain pleasure/lack of worry about driving an ancient car - no one's going to nick it, I don't worry about fools in car parks etc. And I'm not making repayments on it so have more disposable income than my shiny car owning neighbours.

P x

andyfromotley

Car loans imo are responsible in large part for keeping people skint and in an endless cycle of debt.

I have managed to break out of this cycle and drive a 12? year old honda civic in a very fetching yellow/mustard. It cost me £1500 and i have had it a year, i hope to get AT LEAST another 2/3 years out of it and hopefully longer. My mates take the pee out of me but i simply say 'yeah its bad.. but its paid for'. This is usually met by an awkward silence.

I couldnt give tuppence for new/expensive cars any more they depreciate horrifically and cost far too much. Anyone who really judges me by my car probably isnt my sort of person anyway. I feel like i have broken free from a debt trap set for me by the car industry.

If you want a car, get one, but realise, it will make you poorer, you have identified that it will impact your savings goals. It wont be easy though as people tend to get car fever and its very hard to break out of this.

jaydeeuk1

Puddylove wrote: »

And I'm not making repayments on it so have more disposable income than my shiny car owning neighbours.

P x

Unless you know what salary and debt they have, how do you know that. By all means if it makes you feel better think that but not everyone with a brand new car on the drive is living on the breadline.

Puddylove

jaydeeuk1 wrote: »

Unless you know what salary and debt they have, how do you know that. By all means if it makes you feel better think that but not everyone with a brand new car on the drive is living on the breadline.

I agree that part of the reason people buy brand new cars is to project an image of 'doing well for themselves'. I like your 'if it makes you feel better' line - you are so entrenched in equating a certain car with feeling good about yourself. Of course, this is exactly the trap that marketers want you to fall into, as Andy says.
And, having checked, 75% of new cars ARE bought on finance.
No need to take it personally; I'm sure you're a cash buyer, and frightfully rich.
P x