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Original poster

pay off overdraft or buy car, what would you do?

30 replies

OhWhatAPalaver · 27/07/2013 22:53

So i finally got a small but nice amount of cash from an insurance payout - someone crashed in to me and wrote my car off 2 and a half years ago - and I have been without a car for so long now, i have just been waiting and waiting for the cheque to arrive.... but now that it has and its in my bank, which is now in credit for the first time properly since uni days (10 years ago) i do kind of like the feeling of not being in debt. its pretty good.
BUT we really would like a car. Correction, we NEED a car. We have a 18mo daughter and we live miles away from our friends. So we really do need a car or i think we will go insane, as we really don't like where we are living atm. I just hate to see my bank back in the black only for it to go straight in to the red again when we buy. :(
Am i doing the right thing? WWYD?

OP posts:
LadyKooKoo · 28/07/2013 08:40

Pay off the overdraft and save for a car!

Bunbaker · 28/07/2013 08:44

"Pay off the overdraft and save for a car!"

^^ this.

You might be able to negotiate finance for a car that has better interest rates than an overdraft.

BeesGoBuzzzzzz · 28/07/2013 08:53

I agree with the posters above, don't go into overdraft for a car unless you need it for work.

If you hate where you live, it would be better to address that issue if you can, rather than get into debt to cope with it.

Fairylea · 28/07/2013 08:58

Agree with previous posters.

If you have managed thus far without a car it is a want rather than a need, so you can afford to wait and save.

Also, how much are you thinking of spending on a car? I have only ever had cheap second hand cards in the region of 500-900 £ and they have always served me well. Whatever you do don't buy a car on finance or anything like that.

purplewithred · 28/07/2013 09:01

I do sympathise - being In The Black is a fantastic feeling. (I'm old enough to remember my dad's bank statements where the overdraft was written in red).

Keep the bank account in the black and use a proper loan for the car - not an overdraft. If you can manage the payments then a loan on a car is fine. Read Martin Lewis money tips about good debt vs bad debt.

TeWiSavesTheDay · 28/07/2013 09:06

How much in the black are you now and how much do you need a car?

You could buy a car for £300 odd quid, but you also need to bear in mind petrol, insurance, car tax, mot and repairs, car parking at destination...

If you would rarely use it public transport, taxi's and delivery charges can be cheaper. You need an honest budget of both options.

I know it's hard not having a car with kids though.

Original poster
OhWhatAPalaver · 29/07/2013 08:49

Yeah, I see what you're all saying. I wasn't going to spend more than 1000 on a car anyway but I think we really do need one. I'm wondering if its worth trying to get a loan for 1000 that has a better rate than my overdraft but I have no idea where to start looking!

OP posts:
Original poster
OhWhatAPalaver · 29/07/2013 08:57

After all this month's bills have come out it wont leave me with much, prob about 100-200 quid. So the compensation would pay off all my overdraft and leave me slightly in credit!

OP posts:
Earthworms · 29/07/2013 09:06

Just remember, running a car is bloody expensive. Tax, insurance, mot, servicing, fuel. The cost of purchase is a tiny part of the cost involved.

If you can't afford to live now, you cannot afford to run a car.

If you are determined to have one, a vehicle loan will have a better rate of interest, and look better to any credit rating agencies than just using an overdraft to pay for it. Banks and car dealer offer vehicle loans.

LEMisdisappointed · 29/07/2013 09:15

With a car comes tax and insurance and mot - unless you are good with mechanics a cheap car will inevevitably cost you a fortune to run if you can't fix things yourself. Things like the clutch, breaks etc will need attention at some point - if you can change them yourselves then its not so bad, otherwise you end up paying more than the car is worth.Also, things that unexpectedly go wrong can be really costly So you have to factor in the cost of the car to the cost of the overdraught. You are probably looking at about £40 a month for insurance on top of petrol etc. How do you get about now? I have to be fair i wouldn't want to be without a car - I don't drive but at weekends i am chauffered by DP, if we didn't have a car we would be pretty trapped.

Do the maths, work out how much you spend on public transport, having to shop locally as opposed to big tesco shop or paying for delivery. What about nursery/school? Do you work? Does your partner work? how do they get to work?

Are you to be buying food for the month on the £100-£200? because i reckon you'll be stuffed with a car as it will probably cost you in the region of that per month to run.

RobotBananas · 29/07/2013 09:25

Don't bother buying a car. It costs so much to run one that if you don't need it for work, you can actually be better off getting taxi's everywhere! Esp if you can only buy an old banger that's likely to be in the garage quite a lot.

Original poster
OhWhatAPalaver · 29/07/2013 10:00

My partner works and doesn't drive, it takes him 90 mins to get to work on public transport! I am looking for a job and finding it hard to get one, partly because I can only look locally. If I had a car I could search a wider area.
I plan on getting a car that's in good nick and has good reliability, not an old banger so hopefully it won't need too much maintenance.
I just feel gutted that the compensation would only get me out if debt and not go towards anything else. But at the same time I don't really want to be in debt again! Bah...

OP posts:
nextphase · 29/07/2013 18:54

How much would you save each month by not paying overdraft fees?
Can you put that, and any pennies you were using to make the overdraft smaller each month into a car fund?

Could you not expand the work search by getting a bike and toddler seat with the £100 left over?

MissMarplesBloomers · 29/07/2013 19:00

Why do you need to buy one outright?

Shop around for a good car finance deal, using how much per month you can manage (ie £100-200) if you've paid off the overdraft you will save more money as long as the loan is at a lower rate.

It will then enable you to get some paid work which will replace the monthly payment, even if you have to go overdrawn by a few hundred each month for the first few months.

LEMisdisappointed · 29/07/2013 19:51

now see, if your lack of vehicle is preventing you from getting a job (i so hear you on that, i don't drive and its restrictive) then that puts a different slant on the maths. Could you put the money away somewhere and then set about the job hunt further afield, if you manage to get a job then you could defo afford the car!

LadyKooKoo · 29/07/2013 22:11

There is no logic in buying a car to find a job. What happens if you buy a car and still don't find a job? Then you will be even further up the debt creek without a paddle! Find a job and then buy a car if you need one to get there. However, I will echo what others said, you need to sit down and work out the costs of running a car, not just buying one. Tax, MOT, Insurance, Service, Fuel.....

Original poster
OhWhatAPalaver · 30/07/2013 08:54

Thanks for the varied advice :) I've been looking on money saving expert for tips as well!

OP posts:
overmydeadbody · 30/07/2013 09:02

how about buying a good bike with some of the money? They you could look further fr jobs and you'd be able to get around more too. You can get panniers for shopping and a toddler seat/trailer too. Your DP could get a bike too and then you could go everywhere as a family on them.

Alwayscheerful · 30/07/2013 09:02

Could you think about moving nearer your husbands job, maybe somewhere with better transport links? Easy if you rent but not so easy if you have a mortgage. Hold back from buying a car as long as possible. Even a £5,000 car can generate hefty unexpected bills, my friend has a lovely little car bought from a reputable dealer but she had to take a loan out to cover an electrical fault which costs £1500 to fix.

A car is not an asset is is a liability.

Childcareisscary · 30/07/2013 09:12

Pay off overdraft.

LEMisdisappointed · 30/07/2013 09:16

The trouble with that idea "alwayscheerful" (love the name!) is that rents and house prices tend to be higher in areas closer to where the work is. Although living in the middle of nowhere with little budget and no transport doesn't make much sense either.

I agree with you re cars - we paid 7k for our car (8 years ago), which, on the whole has been brilliant, despite being 15 years old (mercedes - so built to last) We still have to spend money out at every MOT, things like the clutch, brakes etc will need replacing no matter what age/type of car. Also, being a higher spec/newer (ish) car, if anything goes wrong its more complicated to diagnose and get to the engine, you tend to need an auto-electrician or specialist for that type of car to do any works that need doing. An older car can be more econimical, but only if you are prepared to do any mechanical work yourself - you can get parts at scrap yards and buy parts yourself and fit them, which is peanuts compared to what a garage would charge you. If you are paying 1K for a car you WILL have repairs.

A bike could work, you can commute to work easier, especially if you get a fold up bike to take on train.

Alwayscheerful · 30/07/2013 10:18

I am in complete agreement with you LEM, two second hand Mercedes in this house, they both need maintaining, some years no maintenance costs and others high costs but very little in terms of depreciation.

It was just a thought re housing but at least housing costs are usually fixed whereas vehicle and transport costs are more difficult to budget for.

LEMisdisappointed · 30/07/2013 10:32

yes, thats true about the housing. Too many nasty surprises with cars

MissMarplesBloomers · 31/07/2013 10:22

Loved the presumption that public transport is available to all !!

If you live in rural areas a car is a must not a luxury. Whiles costs may vary a little, if you have a newer car & add up the cost of service/tax/MOT a certain amoount of petrol a month & spread the cost out over the year you can budget pretty well. if occasionally you have to go overdrawn to get fuel/tax disc it will still be OK as long as you pay that off within a few months.

Jobs are so scarce at the moment I think you HAVE to have transport sorted before you go for interviews, it used to put me right off if a candidate relied on local transport as it is so infrequnet/unreliable in our area.

If the transport links are good then that's different!

Alwayscheerful · 31/07/2013 14:07

Miss Marples -OP said she wasnt going to spend more than £1,000 on a car, which can make budgeting very unpredictable. I appreciate what you say about public transport, it is not always an option.