Car Debt

[Rv821]

Hi Eveyryone

How do you view car debt? Do you view it in the same way as credit card/loan debt. Some people seem to view Car finance/HP/PCP etc as more of an expense than a debt. I am keen to get others thoughts as I am pondering how to buy a car.

It’s an expense for us.

@Moonshine11

It’s an expense for us.

Thanks. If I am honest I was hoping that people would say that. I am trying to deal with our other debts without feeling overwhelmed about having to add the possibility of car debt to the debt balance!

I know what you mean! We are dealing with other debts also! I just try to think of the monthly payment as part of the bills and not debt 🙈

I took out a 3 year pcp as really needed a reliable car in 2018 but on reflection I’d have got a normal personal loan and bought a good newish second hand

Doesn't matter what you call it, if you are struggling with other debt can you afford it?

It's a big and potentially unsecured debt that can cause you real problems if your income dips. I wouldn't get a car on PCP if your finances are already stretched and you are carrying a good deal of unsecured debt.

Its an expense in my view too. I needed a reliable car. Its nothing fancy.

I’ve really felt it as unnecessary debt that I’m tied to, I’ll pay the balance and keep the car (and need a personal loan for that) but never again am I going down the pcp/hp route

@Auntieobem

Doesn't matter what you call it, if you are struggling with other debt can you afford it?

Hi, thankfully we can afford it. We do have a lot of other debt but we managed to see sense whilst it was still manageable and now we are able to afford the payments and reduce the debt month by month.

Debt or expense, it still comes out of your income. I don’t see the difference between the two really. For me I think of it as a debt.

As an expense, prior to my current car I had cars which were 5/6 years old and the MOTs would start getting expensive after a year or two. My car payments on my 2 year old car are only so lightly more than the yearly MOT used to cost me. So car patent s to me go in the same bracket as the MOTs used to

What happens if you suddenly can't afford to pay it for a month or two months? What are the penalties?
It is debt because you're paying off something you already have. Unless you can just hand it straight back with no penalty if you need to stop paying, then I don't see how it could be anything other than a debt.

Expense. In the same way that a mortgage is inevitable for most people and if you didn't have it you may be debt free but would be paying rent every much to the same value, or more. With car debt without it you may be severely limited in work options, paying other transport costs or paying out loads to garages due to having an unreliable car that was past its best. However, if I was needlessly updating my car every few years through loans or pcps/hps I would see that as debt, in the same way that other non-essential purchases on credit are debt. No problem if affordable but a debt nonetheless.

I am keen to get others thoughts as I am pondering how to buy a car.

I don't think how other people view debt matters. Can you afford it? Is it the right option for you?

I’ll view it as a debt. Mainly because before you get it, they’ll check if you meet the affordability criteria. If it’s not paid then there are penalties and also ones credit file will be impacted as well. So I think one can safely categorise it as a debt because that’s how the finance company will view it too.