Car Debt DIlemma from Newbie

AlexFW

Hi everyone. First post on here.
Recently, I have been really impacted by this site - and Dave Ramsey too. I want to be debt-free and do all I can to build healthy financial freedom. I've finally realised how debt is not a friend, and want it gone.

I have two loans - one is a 4 year 10k loan from Nationwide for bits and bobs which I aim to pay off this year. My second is an 11k loan for a 3 series BMW worth about 7.5k if I sell it privately. I have about 4 years on that loan, too. Joint monthly payments for both are nearly £500. My bigger financial aim is pay off debt to save up a house deposit.

Would you recommend selling the BMW to throw the majority of the 7.5k at it's outstanding balance, to pay it off very quickly, and get a cheaper run around? I'd then do a Dave Ramsey and save for every car I own, working up from a simpler run around. Or if I could pay it off in 2 years, is it worth keeping for five or so years?

fatbelly

If the car loan you used to buy the BMW is just a standalone loan then you can view this as two separate issues.

1. Do you want to persevere with a 7k car?

2. Do you want to release 5/6k and where should it go?

On (1) folks on the bangernomics thread would tell you it's possible to get something reliable around 1k and then depreciation is not really an issue. Maybe ask on that thread.

https://forums.moneysavingexpert.com/discussion/3803929

On (2) you apply it to whatever has the highest interest.

Of course if the car finance is a different form like HP/PCP, then your options are different and you cannot sell the car.

EssexHebridean

Think about the running costs on the car you're debating about selling as well - likelihood is that a BMW may not be the cheapest to own/insure/tax/run so set out on paper what your current annual running costs are (everything from fuel through the big bills, servicing, insurance etc, to oddments like wiper blades) then list the same comparative costs on the sort of cheaper runaround you're considering. If it helps we currently run two cars - both what I would decribe as runarounds - I've owned my 10 year old Clio from brand new, and the OH's Citroen C3 was bought second hand for 2k some years ago. We currently budget £165 per month for everything excluding fuel - so £82.50 per month, per car.

Kidder81

As fatbelly says, if the loan is not linked to the car, I would sell the car and use the money, minus the cost of a new car to pay off the highest percentage debt. You'd certainly be debt free sooner which sounds like your goal.

In terms of bangernomics, we bought my wife a 51 plate Corsa for £300 2 years ago. We've probably spent about £200 on it since then, not including tax and fuel, so it can certainly be done. Good luck.