Buying a Car that is cheaper to run - during an appeal on a mortgage

PragmaticDan

Hi MSE Forum,

I'm struggling to figure out whether to use my savings to buy a car now or to wait a few months.

I'm struggling to make this decision because my financial circumstances have changed significantly due to a recent separation and taking on the mortgage and all bills by myself. This means my monthly savings will significantly reduce as a result. I have minimal debts which I can manage.

I'm currently going through a process with my mortgage provider to build three months of evidence of paying the mortgage myself with no external support. This will then be put to an appeal to the underwriters to change the mortgage into my name.

As a result, i have been going over my bills very carefully. One thing that stands out is the ongoing running costs of my old car.
It currently costs me about £45 a week in fuel, about £35-£40 of that it is using each week. The tax is also £30 a month. Insurance isn't great and being old (2003) it always has issues that need resolving. Currently the car is in ok mechanical condition. The MOT runs out in September. The front brakes have started getting noisy when the car is warm
and the oil warning light comes on, just after starting the car, which goes out after 10 seconds (there's plenty of oil on the dipstick).

I've seen a car for £5000, a 2015 skoda citigo, known to be very reliable and cheap to maintain. The VED is also £0. It should be much cheaper to insure.
I have enough savings to buy the car outright, and still have enough savings to amount to 3x my monthly salary.

I worry that:
    - if something goes wrong with the house then it will be another large chunk of money - however this could happen before or after i buy a car anyway.
    - Purchasing a car from savings, might not look good as part of the appeal process. I will speak to my bank about this. But i can always move savings from a bank not associated with my mortgage and into my Revolut account to buy the car.
      
I need some advice on whether i should consider buying a car now, using my savings, or wait until my situation with the house has stabilised? (approx 3 months, plus time for the appeal to go through).
 
Many thanks,
PragmaticDan 

Herzlos

How much is your car worth? I'd have assumed not much but the car market is crazy.

However, I really doubt it's financially wise to spend £4500-ish right now in order to save £360 in tax and under £80/month in fuel (assuming you can half your fuel usage). Maintenance wise it may make some sense, but with the mortgage thing I'd try and hold off until it's been settled before spending that kind of money.

The oil light is supposed to come on for about 10 seconds when you start the car, to show that the system is working. You only need to worry if it stays on.

Chris_English

No, spending significant money on a new car right now woudl not be a good idea. The savings that you hope to make, they won't appear on the statements that you are looking at, but the significant drop in your savings will appear immediately.

Grumpy_chap

Changing your car won't change the largest cost identified with the car (£45 per week fuel) - even going from petrol to diesel, you'd only get that down by £15 per week (max).  So, you could reduce car costs by £90 per month (£60 petrol plus £30 VED) if you outlay £5k, so a pay-back of 55 months is 4 years.  

One tool that the OP could use to better understand their budgets and opportunities is to visit the DfW (debt free wannabee) area of the Forum and prepare a SoA (Statement of Affairs).  This can be used by the OP themselves to identify efficiencies that may be possible or can be shared if the OP chooses and wishes to seek suggestions from others.

PragmaticDan said:

Hi MSE Forum,

I'm struggling to figure out whether to use my savings to buy a car now or to wait a few months.

I'm struggling to make this decision because my financial circumstances have changed significantly due to a recent separation and taking on the mortgage and all bills by myself. This means my monthly savings will significantly reduce as a result. I have minimal debts which I can manage.

I'm currently going through a process with my mortgage provider to build three months of evidence of paying the mortgage myself with no external support. This will then be put to an appeal to the underwriters to change the mortgage into my name.

As a result, i have been going over my bills very carefully. One thing that stands out is the ongoing running costs of my old car.
It currently costs me about £45 a week in fuel, about £35-£40 of that it is using each week. The tax is also £30 a month. Insurance isn't great and being old (2003) it always has issues that need resolving. Currently the car is in ok mechanical condition. The MOT runs out in September. The front brakes have started getting noisy when the car is warm
and the oil warning light comes on, just after starting the car, which goes out after 10 seconds (there's plenty of oil on the dipstick).

I've seen a car for £5000, a 2015 skoda citigo, known to be very reliable and cheap to maintain. The VED is also £0. It should be much cheaper to insure.
I have enough savings to buy the car outright, and still have enough savings to amount to 3x my monthly salary.

I worry that:
    - if something goes wrong with the house then it will be another large chunk of money - however this could happen before or after i buy a car anyway.
    - Purchasing a car from savings, might not look good as part of the appeal process. I will speak to my bank about this. But i can always move savings from a bank not associated with my mortgage and into my Revolut account to buy the car.
      
I need some advice on whether i should consider buying a car now, using my savings, or wait until my situation with the house has stabilised? (approx 3 months, plus time for the appeal to go through).
 
Many thanks,
PragmaticDan 

PragmaticDan

Herzlos said:

How much is your car worth? I'd have assumed not much but the car market is crazy.

However, I really doubt it's financially wise to spend £4500-ish right now in order to save £360 in tax and under £80/month in fuel (assuming you can half your fuel usage). Maintenance wise it may make some sense, but with the mortgage thing I'd try and hold off until it's been settled before spending that kind of money.

The oil light is supposed to come on for about 10 seconds when you start the car, to show that the system is working. You only need to worry if it stays on.

Thanks @Herzlos. To answer your question. Really not a lot, its probably only worth about £750 and that would be from a private sale.

Also its a 6 cylinder petrol, so the fuel consumption, especially in winter, is very high.

Grumpy_chap said:

Changing your car won't change the largest cost identified with the car (£45 per week fuel) - even going from petrol to diesel, you'd only get that down by £15 per week (max).  So, you could reduce car costs by £90 per month (£60 petrol plus £30 VED) if you outlay £5k, so a pay-back of 55 months is 4 years.  

One tool that the OP could use to better understand their budgets and opportunities is to visit the DfW (debt free wannabee) area of the Forum and prepare a SoA (Statement of Affairs).  This can be used by the OP themselves to identify efficiencies that may be possible or can be shared if the OP chooses and wishes to seek suggestions from others.

PragmaticDan said:

Hi MSE Forum,

I'm struggling to figure out whether to use my savings to buy a car now or to wait a few months.

I'm struggling to make this decision because my financial circumstances have changed significantly due to a recent separation and taking on the mortgage and all bills by myself. This means my monthly savings will significantly reduce as a result. I have minimal debts which I can manage.

I'm currently going through a process with my mortgage provider to build three months of evidence of paying the mortgage myself with no external support. This will then be put to an appeal to the underwriters to change the mortgage into my name.

As a result, i have been going over my bills very carefully. One thing that stands out is the ongoing running costs of my old car.
It currently costs me about £45 a week in fuel, about £35-£40 of that it is using each week. The tax is also £30 a month. Insurance isn't great and being old (2003) it always has issues that need resolving. Currently the car is in ok mechanical condition. The MOT runs out in September. The front brakes have started getting noisy when the car is warm
and the oil warning light comes on, just after starting the car, which goes out after 10 seconds (there's plenty of oil on the dipstick).

I've seen a car for £5000, a 2015 skoda citigo, known to be very reliable and cheap to maintain. The VED is also £0. It should be much cheaper to insure.
I have enough savings to buy the car outright, and still have enough savings to amount to 3x my monthly salary.

I worry that:
    - if something goes wrong with the house then it will be another large chunk of money - however this could happen before or after i buy a car anyway.
    - Purchasing a car from savings, might not look good as part of the appeal process. I will speak to my bank about this. But i can always move savings from a bank not associated with my mortgage and into my Revolut account to buy the car.
      
I need some advice on whether i should consider buying a car now, using my savings, or wait until my situation with the house has stabilised? (approx 3 months, plus time for the appeal to go through).
 
Many thanks,
PragmaticDan 

Thanks @Grumpy_chap. I have currently put all my outgoings on a google sheets to determine what I can do without and which bills can be reduced/removed. I will certainly consider putting together a statement of affairs as i reckon this will help as I get an accurate understanding of my new budget over the coming months.

With rough figures, I could cut my fuel bill by about 38 to 40% (going from a 31mpg 6 cylinder to a ~50 mpg 3 cylinder).

As written by @Herzlos , saving less than £80 pm realistically, in fuel. Plus the savings in tax, insurance and maintenance. It sounds like the initial outlay makes little financial sense at this time. Coupled with the benefit of stable outgoings and a larger savings cushion to rainy days.

Herzlos

PragmaticDan said:

Thanks @Herzlos. To answer your question. Really not a lot, its probably only worth about £750 and that would be from a private sale.

Also its a 6 cylinder petrol, so the fuel consumption, especially in winter, is very high.

You'd definitely save some money in terms of fuel, tax, insurance by downsizing to a small hatchback, but I wouldn't be spending £5k on it. There's currently 390 cars on autotrader at the moment between £500-1000, with a petrol engine 1.4l or smaller. Most appear to be "p/x to clear" so there's always the risk that you're picking up something with issues, but if you have a trusted mechanic to look over it you'll be fine.

Then you can potentially do it with no outlay.

PragmaticDan

Herzlos said:

PragmaticDan said:

Thanks @Herzlos. To answer your question. Really not a lot, its probably only worth about £750 and that would be from a private sale.

Also its a 6 cylinder petrol, so the fuel consumption, especially in winter, is very high.

You'd definitely save some money in terms of fuel, tax, insurance by downsizing to a small hatchback, but I wouldn't be spending £5k on it. There's currently 390 cars on autotrader at the moment between £500-1000, with a petrol engine 1.4l or smaller. Most appear to be "p/x to clear" so there's always the risk that you're picking up something with issues, but if you have a trusted mechanic to look over it you'll be fine.

Then you can potentially do it with no outlay.

This could be a good option, either way, for after the mortgage review period. :-)

PragmaticDan

I wanted to extend an extra thank you for the kind words of advice and the quick responses. Very much appreciated.

Nobbie1967

Herzlos said:

The oil light is supposed to come on for about 10 seconds when you start the car, to show that the system is working. You only need to worry if it stays on.

Not sure that’s correct. The oil pressure light comes on when you turn the key to the first position with the engine off. Once the car starts it should go out almost immediately. If it doesn’t, it indicates that it is taking time to get the pressure up, or more likely the oil pressure sensor is faulty.

PragmaticDan

Sorry for the delay in responding. I believe there to be an issue with the oil level sensor (i think it is common to fail on these cars). After starting the car, all lights go out, but then the yello oil level warning light comes on and remains for about 5-10 seconds before going out again.

Please correct me if i am wrong, but i've looked up the rules on the gov website and under a section called "nuisances" they refer to the EML - engine management light - indicating a fault is a failure item on the MOT. So i think the yellow oil light coming on then going out, shouldn't fail an MOT?

PragmaticDan

I have found a mitsubishi colt 1.3 cleartec for £1800. Which could be a sound investment for reducing monthly car costs