In a DMP but needing a new car...

321654987

We are very near to completing our DMP - we will be debt free in three months, after paying off nearly £30K in 2.5 years. Once we are debt-free the plan is to save for a year before attempting to move house. The problem we now have is that one of our cars needs replacing (there’s no question of sharing one) so we would ideally need a new one and replace the older with the existing family car. Once our DMP payments are paid in May we will have £1000 extra a month and I wondered if there’s any way of a PCP (or alternative) being agreed so soon after we have finished the DMP? Obviously our credit history will still be bad but we will have the propensity to afford the payments whilst saving at the same time and will be completely debt-free. Can anyone suggest a solution?

Frudd

First, why do you need two cars? what are they both used for. Second, do you mean a new car or new to you?

MrsTinks

The question isn't really your DMP but how long until your defaults drop off your files. When did the defaults get registered?
The longer ago this was the better, and settled in full is always better than active defaults.

Personally I would say it's possible you're better off saving for a few months, buying another run around for a year and then looking at having a better deposit for the new car. (yes I know some will say you shouldn't get a car on credit... this all depends on how long you typically keep them etc - I'm one of those people who buying a car for just doesn't work... I need newer cars due to work and to be having a car is an overhead - just saying this as it's bound to crop up sooner or later...)

MrsTinks

Frudd wrote: »

First, why do you need two cars? what are they both used for. Second, do you mean a new car or new to you?

Doesn't greatly matter - you can buy either on PCP.

321654987

Thanks Mrs Tinks. We have 3 defaults, 2 x 2015 and 1 x 2014 and all these are now settled. Our DMP now consists of one last debt of just over £3k which is a credit card and didn’t default. This will be paid off in May.

My first instinct was to buy a cheap runaround, which we don’t mind doing, I just wondered if there was an alternative to make us more secure (car-wise that is). We have a baby due in May and so it would be a nightmare if both cars needed work and we couldn’t afford to repair both given we have no ‘savings-cushion’ owing to the DMP.

EssexHebridean

You don't "need" a "new" car - you've said as much yourself. Looking at it logically, can you manage either nursing the existing car along until the summer, or sharing until then, so you have money freed up? I'd then say allocate say 2k from your first 2 months DMP free (well done for that, too!) to buying the cheap runaround, and see how long you can keep it going for.

MrEH's cars have always been on the basis that we'd run them until we dropped - from memory we paid £2,300 for the first (03 plate Citroen C3) and £2,000 plus the exceedingly knackered '03 for the current one (55 plate Citroen C3). With both cars we had a mental cut-off of the level of spend we were willing to make to keep them running - when the 03 had a lengthy advisories list from the MOT test we took the decision to part ex her. As and when the current one gets to that stage we will probably double our spend this time round to get him something slightly newer, but we're now at the completely debt and mortgage free stage so our situation is different. My car was bought brand new in my pre-MSE days - back in 2007 - and will be kept for the forseeable future or until she starts costing us too much.

I should declare that I'm really not a fan of cars on credit, and even less the sorts of deals that mean that after a few years you either have to hand back, or find another large lump sum to buy the thing outright. To me it doesn't make economic sense to be paying out large sums without actually realising an asset from that.

You've worked so hard to make yourself debt-free - don't be tempted to instantly put yourself back into the situation of owing money again unless it can absolutely not be avoided - and particularly not with your little one on the way!

fatbelly

Car finance (in the sense of HP/Conditional sale/PCP) is not so hard to get as other forms of credit as the debt is largely secured on the asset.

Having said that, EH's plan is more cost effective, provided you don't buy a lemon. There are well cared-for cars out there, around 10 years old, moderate mileage, at that suggested price. They won't be for the image-conscious, but if you can live with a Meriva, Ford Fusion or Skoda Roomster you'll be fine.

Maybe ask on the motoring board - it's still part of mse and they will be interested in helping you keep as much of your newly available surplus income as possible!

321654987

Thanks FatBelly, I’ll post on there and see what they say.

As I said a runaround doesn’t really bother us (it would literally be for my partner to commute Monday-Friday, nothing else) but I’m loathe to pay over the odds continually for something that’s not worth the money. We have two conflicting issues really:

a) A monthly payment for assured reliability makes more sense for us than the risk of having to find an unpredictable amount of repair money at late notice. We have a diesel Golf that’s still going strong but it’s my partners Peugeot (03 plate) that is literally on its last legs.
b) My concern would be if we did get finance (either HP/PCP etc) it would be detrimental to us wanting to move house in 2018. As we are wanting to have a ‘clean-record’ for at least a year before attempting to sell our house and buy a bigger one.

Frudd

[QUOTE

a) A monthly payment for assured reliability makes more sense for us than the risk of having to find an unpredictable amount of repair money at late notice. We have a diesel Golf that’s still going strong but it’s my partners Peugeot (03 plate) that is literally on its last legs.
.[/QUOTE]


There is no such thing as assured reliability. Even brand spanking new cars break down and are not necessarily covered by warranty. What sort of commute are you doing in it?

321654987

Yes, you have a point. But realistically there is more chance of a 15 year old car needing repair than a new one.

It is used for approximately 25 miles / day so roughly 500 miles / month. Nothing at weekends, evenings etc.

enthusiasticsaver

As you are just coming to the end of a DMP I would be extremely reluctant to then start committing yourself to car finance loans. If you have paid off £30k in 2.5 years that is £1k per month. My suggestion would be you save for 3-4 months after DMP finished and buy a runaround for £3-£4K.