I need advice for financing a cheap car please

Lyndamacdonald

Hi all. In the past I was silly with money and got in to real financial problems but that’s now hopefully all behind me and I’ve been 10 years ‘clean’! After lying low for the past 10 years with no debt of any kind it has also meant I have no worthy credit score. I’ve recently applied for and been accepted for a M&S credit card so that will help. I’d like to buy myself a small cheap-to-run car and wonder if I can ask for some impartial advice - I have £3000 deposit and was looking at spending maybe £5/6000 on a car so financing the remainder on HP to further improve my credit rating. My question is - am I better off putting the remaining sum on the new M&S credit card and making the most of the 0% for 21 months or getting HP from a car dealership, or - as someone else has now suggested to me - buying a more expensive/newer car (With the further benefit of possibly less problems to appear) on PCP? I’m not fussed about ‘owning’ the car, I don’t get emotional over cars. I’m confused with it all now. If I’m trying to keep monthly payments to circa £150 which is very do-able to repay, what would be the best way for me to fund the car whilst rebuilding credit worthiness and incurring the least amount of problems along the way?
hope that all makes sense and apologies for the waffling - I’m trying to do the best thing but have got a bit confused with options and don’t want to appear stupid or make a costly wrong decision. 

Huge thanks in anticipation of any advice at all. 

DrEskimo

Personally I avoid all forms of consumer debt. So would just use your £3k and buy outright using that as my budget. Alternatively do you have to buy now? Any reason you couldn’t save some more and buy when you have the £5k in savings?

If you do have to borrow some then using the 0% CC would be the best way forward, providing you set up payment to clear in full before the interest free period is up and don’t deviate. 

I would avoid HP and certainly wouldn’t get suckered into the PCP trap of paying substantially more and getting further into debt on a more expensive car. The whole “I don’t want to own the car” is a misnomer. It’s just as easy to trade cars every few years that you own, as those you don’t own. It’s all a matter of cost. 

Lyndamacdonald

@DrEskimo that all makes perfect sense thank you. I was initially thinking the 21 0% months sounded great but then I couldn’t get my head round putting a car loan on a credit card! But you’re right - if I make absolutely sure I pay the monthly payments (and try to over pay whenever possible, which is might be for a large amount of the payments) then it should be ok. And you’re right about the PCP - I think the ‘old me’ was being lured in with an even more expensive/attractive car when I don’t need it. I had set a budget of £6k and should stick with my original plan and try not to be swayed by glitter! Thanks v much for taking the time to reply and reassure me. 

Jami74

I had very similar questions a few years ago. Thankfully I was turned down for a loan and instead bought a really cheap car for just under £1000. At the time I told myself that if it ran for a year and then needed replacing it would still be a better deal than paying finance on a more expensive car. I've had it almost five years now and while there have been some repairs it has still worked out cheaper than repayments on finance for a more expensive car would have cost me.

If you can buy a car for less than the £3000 that you have, and then put that £150 a month into a regular saver then after 20 months you'll have £3000 for the next car. Your car won't necessarily need replacing at that point and you could carry on saving £150 a month until you do need to replace it.

DrEskimo

Jami74 said:

I had very similar questions a few years ago. Thankfully I was turned down for a loan and instead bought a really cheap car for just under £1000. At the time I told myself that if it ran for a year and then needed replacing it would still be a better deal than paying finance on a more expensive car. I've had it almost five years now and while there have been some repairs it has still worked out cheaper than repayments on finance for a more expensive car would have cost me.

If you can buy a car for less than the £3000 that you have, and then put that £150 a month into a regular saver then after 20 months you'll have £3000 for the next car. Your car won't necessarily need replacing at that point and you could carry on saving £150 a month until you do need to replace it.

Couldn't agree more with this. Something I hadn't thought about was making sure you had sufficient savings for any unplanned repairs. If you buy a £2k car, you then have £1k set aside for any repairs. Keep saving and then in a few years upgrade. Run the cheap car for as long as you need it. Doesn't need to be a long term solution.

As above, you'll probably find you keep it years and years though!

MalMonroe

Lyndamacdonald said:

@DrEskimo that all makes perfect sense thank you. I was initially thinking the 21 0% months sounded great but then I couldn’t get my head round putting a car loan on a credit card! But you’re right - if I make absolutely sure I pay the monthly payments (and try to over pay whenever possible, which is might be for a large amount of the payments) then it should be ok. And you’re right about the PCP - I think the ‘old me’ was being lured in with an even more expensive/attractive car when I don’t need it. I had set a budget of £6k and should stick with my original plan and try not to be swayed by glitter! Thanks v much for taking the time to reply and reassure me. 

Hi, 

I'd just like to say (after having been in terrible debt myself and now being free of it, after a DRO) don't allow yourself to be talked into the idea of 'a newer, better car' by anyone, because at the end of the day and with the best will in the world, it isn't anyone else's bank account that's going to be affected if it all goes pear shaped, it's yours. I think you know what the best thing to do will be. 

Remember Martin's Money Mantras - Do I Need It? Can I afford it? Will I use it? Is it worth it?

Sometimes when I've been struggling, I've found the information in the following link very inspiring (inspiring me not to spend, that is!)

https://www.moneysavingexpert.com/family/stop-spending-budgeting-tool/  - I especially like the part about sleeping on it. My impulsive nature led me into a lot of disaster in the past.

Just my own opinion and thoughts obviously but I'm like you, I've been in debt in the past and I'd hate to get back in it again. I'm very cautious now.

CKhalvashi

If you search the forum for 'Bangernomics' you should find what you need, including some good buys (old Focii and Rovers tend to be popular there but there is a large range).

The key is buying something decent for sub-£1k and there are many over there with a lot of experience in successfully doing so.

CliveOfIndia

I agree with all of the above comments - the true MSE approach would be to buy a car outright with the cash you have available, then start saving up for another car when it needs replacing in a few years' time.

If you have to find additional funding, then a personal loan over a short period (no more than 2 years) is probably your best option.  But really, if you can get away without having to borrow then that will be by far the best approach.

Regarding the use of a 0% credit card - a fine idea in principle, and very sensible as long as you're absolutely sure you'll be able to clear it in full by the time the 0% promotional rate expires.  The only fly in the ointment may be that many car dealers won't accept a credit card for anything other than a small deposit, due to the fees they have to pay to the card issuer.

Aside from the car purchase, in terms of building up a good credit history, the simplest way is to use your credit card for everyday essential purchase (food, petrol, whatever) and always repay in full every month without fail - assuming it's a standard card that charges interest.  If it's got a 0% promotional rate then you only need to pay the minimum each month, as long as you clear it by the time the promotional rate expires.  But do make sure you understand what the 0% covers - some cards may only offer 0% on purchases made during the first 3 months or whatever.

All that aside, sensible use of a credit card is an easy - and free - way to build up a solid credit history.  You can safely ignore your score and that's not seen by any lender.