Some HELP & ADVICE would be great to my situation! Keep Car or Sell Car

lbahrani

Good Morning, as title suggest im looking for some advice on how quickly to reduce debt and whether debt is managable or shall i sell a car that i need to reduce debt faster and make potential savings greater?

I'll try and be as clear as possible (but please ask if confused)

One Account Debt = £-12415.47 (Facility is £40,000) based against valuation of home at £165k.. Home is paid for through the legacy of my Dad.

Option A - KEEP CAR

Period: 16 Dec 16 - 16 Apr 21

Debt repayment @£257.59 p/month
53 payments @£257.59 = £13,652.27 (Interest = £1,236.80)

Savings generated in Period (if keep car) = 53 x £627.84 = £33,275.52


Option B. - SELL CAR

Sell Car (have 2 cars in household required for both my partner and i to get to work) valued at £11,000 and reduce debt by £6000 and use £5000 to buy an alternative car.

Debt repayment @£257.59 p/month
27 payments @£257.59 = £6,954.93 (Interest = £539.46)

Savings generated in Period (16 Dec 16 - 16 Apr 21)

= 53 payments x £490.24 = £25.982.72 (A)
PLUS
27 payments x £137.60 (whilst debt period is in effect) = £3715.20 (B)
26 payments x £395.19 (£490.24 - £137.60) (once debt is reduced to nil) = £10,274.94 (C)
53 payments x £490.24 (money available for savings) = £25,982.72 (C)

Savings generated in period (if sell car)
(A) + (B) + (C) = 25,982.72 + £3715.20 + £10,274.94 = £39,972.86

To conclude the difference in savings generated is i keep the car is :-

£39,972.86 - £33,275.52 = £6,697.34 missed savings potential if i keep the car.

NB: No SPECIFIC EVENTS OR ITEMS SAVING FOR AT THE MOMENT (except my wife and i future and our children)

Some help and advice would be greatly appreciated, please ask ANY questions for clarification,

thanks

L

Fireflyaway

Hats off to anyone who understands this. I got lost at the start! Numbers are not my strong point! My simple view is if you can reduce your payments by selling the car do that. Do you have money left over each month? You could try and pay it off sooner? Sorry that's all I can add I didn't understand all the maths.

martinthebandit

Is the current car worth £6697.34 to you over the time period your talking about?

Yes = keep it

No = don't keep it

Simples really

fatbelly

Roughly speaking, an 11k car is going to depreciate twice as fast as a 5k car. The difference in functionality between the two is not going to be huge, provided you buy carefully.

Sell the car.

sourcrates

Problem you might have though, especially due to the time of year, dealers have lots of stock at the moment, car prices do fluctuate quite a lot.

Your car may be worth 11k, but you need to find someone willing to pay 11k for it, chances are it will sell for between 9-10k privately, even less if you go to a dealer.

Cars never return there full value when sold.

ratrace

lbahrani wrote: »

Good Morning, as title suggest im looking for some advice on how quickly to reduce debt and whether debt is managable or shall i sell a car that i need to reduce debt faster and make potential savings greater?

I'll try and be as clear as possible (but please ask if confused)

One Account Debt = £-12415.47 (Facility is £40,000) based against valuation of home at £165k.. Home is paid for through the legacy of my Dad.

Option A - KEEP CAR

Period: 16 Dec 16 - 16 Apr 21

Debt repayment @£257.59 p/month
53 payments @£257.59 = £13,652.27 (Interest = £1,236.80)

Savings generated in Period (if keep car) = 53 x £627.84 = £33,275.52


Option B. - SELL CAR

Sell Car (have 2 cars in household required for both my partner and i to get to work) valued at £11,000 and reduce debt by £6000 and use £5000 to buy an alternative car.

Debt repayment @£257.59 p/month
27 payments @£257.59 = £6,954.93 (Interest = £539.46)

Savings generated in Period (16 Dec 16 - 16 Apr 21)

= 53 payments x £490.24 = £25.982.72 (A)
PLUS
27 payments x £137.60 (whilst debt period is in effect) = £3715.20 (B)
26 payments x £395.19 (£490.24 - £137.60) (once debt is reduced to nil) = £10,274.94 (C)
53 payments x £490.24 (money available for savings) = £25,982.72 (C)

Savings generated in period (if sell car)
(A) + (B) + (C) = 25,982.72 + £3715.20 + £10,274.94 = £39,972.86

To conclude the difference in savings generated is i keep the car is :-

£39,972.86 - £33,275.52 = £6,697.34 missed savings potential if i keep the car.

NB: No SPECIFIC EVENTS OR ITEMS SAVING FOR AT THE MOMENT (except my wife and i future and our children)

Some help and advice would be greatly appreciated, please ask ANY questions for clarification,

thanks

L

This is very simple if you like the car and know its history then keep it,
what i suggest you do is

Take the loan payment of £257.59 + the saving that you are going to be putting away each month which is £627.84 and add them together to get a monthly sum of £885.43 (snow ball) keep paying £885.43 every month untill the debt is gone, then start to built the savings up every month

Should be payed off in about 12 months give or a take a month or 2

no point putting money away in savings when you have this debt and paying interest, thats how i would do it just make sure you have an £1000 emergency fund for unexpected things

oh and then pay cash for cars nor more finance especially securing anything against the house

i think i got the gist of the post, maybe not

lbahrani

martinthebandit wrote: »

Is the current car worth £6697.34 to you over the time period your talking about?

Yes = keep it

No = don't keep it

Simples really

Thanks for the reply Martin,

Do you mean will the car's value be £6,697,34 at the end of the proposed repayment period 16 April 2021?

Please clarify

L

martinthebandit

lbahrani wrote: »

Thanks for the reply Martin,

Do you mean will the car's value be £6,697,34 at the end of the proposed repayment period 16 April 2021?

Please clarify

L

You do need to factor in the difference between what the car you have now will be worth and what the cheaper car you would buy to replace it will be worth.

Generally with cars, the most cost effective option is to keep what you have.

Plus you need to factor in the risks of replacing a known car, with any known problems against purchasing a cheaper car with potential, and unknown problems.