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Original poster

To sell my car to pay off debts?

37 replies

Kindfulness · 10/03/2022 08:25

Hi all!

Knowing that second hand cars are worth quite a bit at the mo (Ours is probably work £6-7k from research)...

Would we be unreasonable to sell our car to pay off debt and then take out a new lease car on finance? (Debt of around £3.5k)

Our original plan was for me to get a few pay days behind me and pay off a chunk of our debt, and then look into a new car. However, is time of the essence? Should we look to sell our car sooner rather than later to cash in on the inflated values of second hand cars?

OP posts:
drawingpad · 10/03/2022 09:50

I do see what you’re thinking though and in some circumstances, it could makes sense, eg if the interest rate was lower on the lease scheme than what you’re paying to service your debt now

The interest rate isn't really relevant here when you are talking about a debt of £3.5k which is very little in comparison to the cost of a new car - even with a basic budget car it's still going to more then double the debt.

I agree, also if you're one of those people who spend a lot on fuel and could lease an electric car, so the saving on fuel goes a long way towards the cost of the car.

The cost of an electric is much higher then a petrol/diesel equivalent, with less options available so the car would ultimately cost much more then the debt, even with a fuel saving - which only really works on high mileage motors just now

Foolsrule · 10/03/2022 09:57

@drawingpad - yes, true. You’d need to think about what to do once the first three/four years on the lease are up. In the short term it could help but longer term you may end up back where you are now, OP.

Original poster
Kindfulness · 10/03/2022 11:26

Hey everyone - thanks for the sensible suggestions!

To answer a few questions:

We need a car to do the nursery run, to get to work etc. so going car-less isn't an option.

Regardless of selling our car(it is owned by us) we wanted a car on lease (I've previously used pcp and wouldn't do it again) because we like that we can have a new car, more reliable, and not be lumped with a balloon payment at the end. We don't want to own the car.

I think we would consider HP, but again, by the end of the term, the car isn't worth that much and things can start to go wrong.

The debt will be paid off regardless of selling our car within the next 6 months. But I wondered whether it was sensible to push the sale of our car forward to now, to get the most money for it?

If that makes sense Smile

OP posts:
Original poster
Kindfulness · 10/03/2022 11:29

@Foxyloxy1plus1

Get an interest free credit card and a direct debit to pay the debt off that way.
The debt is on a 0% CC Smile
OP posts:
BarbaraofSeville · 10/03/2022 11:34

Regardless of selling our car(it is owned by us) we wanted a car on lease (I've previously used pcp and wouldn't do it again) because we like that we can have a new car, more reliable, and not be lumped with a balloon payment at the end

I don't think, practically, there is any difference between leasing or PCP for a car. With both, you're paying a monthly fee, and possibly a deposit, for the use of a car over a set period, with similar limits/rules on mileage and return condition.

With a PCP, you have the option at the end to pay the balloon payment and keep the car, or hand it back and pay nothing more.

I'd just compare the cost of the payments over the contract payment, by either way and obviously availability of a car is also a big consideration at the moment.

BarbaraofSeville · 10/03/2022 11:37

If you're going to take a new car for a set period and then hand it back, what do you plan to do for a car after then?

Will you be afford to save to buy your next car outright or will you need to keep on paying to get another new car and are you happy with this?

TimeForTeaAndG · 10/03/2022 11:41

Since you need the car and you're going to be debt free in 6 months and you aren't paying interest then I'd just keep doing that. Then you have a car that you own and no debt.

brainhurts · 10/03/2022 11:41

I think if a new lease car is in your long term plan, then yes selling your car while prices are high is a good idea. I would make sure the car you want is available first

TimeForTeaAndG · 10/03/2022 11:44

Remember that utility prices are only going up at the moment so will you be able to keep up a car payment?

Original poster
Kindfulness · 10/03/2022 11:49

@brainhurts

I think if a new lease car is in your long term plan, then yes selling your car while prices are high is a good idea. I would make sure the car you want is available first
That's a good idea! I can see others have said there's issues with availability of new cars 🚗
OP posts:
Original poster
Kindfulness · 10/03/2022 11:51

@TimeForTeaAndG

Remember that utility prices are only going up at the moment so will you be able to keep up a car payment?
I know! My spreadsheet is constantly getting updated at the mo with everything going up.

We wouldn't take on a lease car if we couldn't afford it.

I worked my butt off retraining last year and have a well-paid job now! Hence why we are wanting to lease. We want a bigger car and a more reliable car as we'd like to drive to north france with our daughter but don't trust our current car!

OP posts:
declutteringmymind · 10/03/2022 12:20

Put the monthly payment for the pcp or hp towards the debt and pay it off. Then get a new car as normal.

It's a car, not a commodity, so to swap interest free debt for debt that costs money is a folly on the face of it.

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