car debt

Jackmessedup

How do you view car debt - HP/Finance/PCP etc. Do you view it in the same way as other debts? It seems that some people don't think of car debt as 'debt' but as more of an expense. Of course it is debt in theory, but I wondered what others think. 

Grumpy_chap

Car debt is still debt.

The "expense" is the cost of buying and running a car.  There are many ways that the need / want can be met without needing to incur debt, even if that means an older car or alternative "thinking outside the box", for example UBER.

Certainly, if you have high levels of debt, it would usually be wise to avoid taking on more debt to buy a car.  If you have high levels of debt and that includes a car, then it can be prudent to sell the car and reduce the debt liability for fewer sleepless nights.

If you share more information about your car needs, I am sure people will be able to suggest ways to reduce the expense and avoid creating a debt liability.

Jackmessedup

We have a car on a PCP plan, along with a load of other debt. At the moment I am trying to deal with it without feeling overwhelemed. My plan is to focus on the credit card debt, some of which is quite high interest and 'ignore' the car for now. If that makes sense! 

Grumpy_chap

The priority is to clear highest interest debt first, so from that point of view focusing on the credit card first makes sense.

However, a car on PCP could be an "easy-win" to allow you to clear the high interest debt quicker.  Depending on the details of the PCP agreement and where you are in that cycle, it may be straightforward to end this debt and reduce the big monthly outlay.  That is then £300 a month, or whatever, that can be used to pay-down the credit cards quicker.

Do not be under any illusion to keep the car because of the image it sends to others about "success" or "status" - if the car has to go, the car has to go.  There are probably very few of us that never had a "good" car and then a far "less good" car for various reasons.

If you have many debts, you may wish to prepare a SoA and share in the DfW forum, or contact an organisation such as Stepchange.

Jackmessedup

Grumpy_chap said:

The priority is to clear highest interest debt first, so from that point of view focusing on the credit card first makes sense.

However, a car on PCP could be an "easy-win" to allow you to clear the high interest debt quicker.  Depending on the details of the PCP agreement and where you are in that cycle, it may be straightforward to end this debt and reduce the big monthly outlay.  That is then £300 a month, or whatever, that can be used to pay-down the credit cards quicker.

Do not be under any illusion to keep the car because of the image it sends to others about "success" or "status" - if the car has to go, the car has to go.  There are probably very few of us that never had a "good" car and then a far "less good" car for various reasons.

If you have many debts, you may wish to prepare a SoA and share in the DfW forum, or contact an organisation such as Stepchange.

Thank you. I'm not worried about the car creating a successful image, however I am worried that if I hand the car back then I have to worry about funding a new car. Due to my work a car is absolutely essential as I work 60 miles from home. 

GrumpyDil

That's a lot of miles for a car on PCP. Are the miles in your allowance high enough to cover those journeys? 

Jackmessedup

GrumpyDil said:

That's a lot of miles for a car on PCP. Are the miles in your allowance high enough to cover those journeys? 

Yes it was factored in when I signed up

DrEskimo

It's a debt, as without the finance the cost of that car would be cheaper. Potentially substantially cheaper. 

How much is the total amount of interest over the full term?

It may be that you are spending too much relative to your other outgoings on just depreciation and interest for a car. Newer cars with large interest costs cost a lot of money, and should only be considered if you are in a financial position to pay for that luxury.

So in short, absolutely its a debt. The faster you pay it off, the more you save and you can move to saving money for a replacement outright rather than constantly relying on finance, where a change in circumstances can have a real impact on your ability to cope financially.

TheAble

Definitely a debt. In my view cars are one of the main causes of financial difficulty.

CreditCardJunkie

I don't count it as a debt, I see it as a business expense.

[Deleted User]

How long has the PCP got left to go before the balloon payment is due?