Single mum, car on finance?

[Carquestion2729]

I’m currently considering financing a car and wondering if it fits my income and expenses. I’d appreciate any advice. I’m trying to manage my budget carefully, but I really need a reliable (used) car, as my current one is close to being written off. I also need a car for work.

I have an excellent credit score, and my bank has offered me a £7,500 loan at 6.6% APR, with monthly payments of £146 over five years.

My Current Financial Setup (Monthly)

Income:

About £3,000 from all sources (employment, overtime, child benefit, maintenance, etc.)

Outgoings: Total £2,025

Rent: £988
Food/Household Shopping: £450
Childcare: £100-£150
Current Car (Insurance/MOT/Tax/Petrol): £120
Credit Card Repayment: £100
Electric: £55
Phone and Internet: £35
Gas: £30
Insurance: £25
Pet Costs: £20
Apple Phone Insurance: £11.99
Spotify: £11.99
Apple iCloud Storage: £8.99
Netflix: £5
Calorie Counting App: £6
NOW TV: £4

I’m careful with money wherever possible. For example, I’ve paid off my phone, so I only have a SIM-only plan. My budget doesn’t currently include things like clothes or my child’s extracurricular activities, or fun things.

Also as I’m in training, I won’t pay council tax for the next 12 months.

Thanks in advance for any advice!

It that really what interest rates are currently? My car loan is 0.8pc from Sainsbury's and my business loan 2.2 pc with Lloyds. Gosh that's crazy money. I had no idea.

Oh and the sort of car I hsve been looking at is from 2016/2017, under 50k miles, never been involved in an accident, recent MOT, full service history and comes with 1y warranty from the garage.

I have only started looking this morning, so I’m not sure what the going rate is for an excellent credit score, just what my bank has quoted me. Fab you had such a low rate - maybe I should shop around!

What about emergencies/car maintenance in your budget?

Yes that’s a good idea to budget for that, I usually just take it out of my bills account as there is always money left there. How much would you suggest I set aside? Thanks

@Carquestion2729 possibly £50 to a £100 if possible?? I'm just thinking of tyres/mot/service etc. been a while since I had a car so not sure of the costs anymore x

I’ve done a little research re apr rates - it looks like the 6.6% I have been quoted is fairly good, this website lists the lowest rates available at the moment as being about 6% so I doubt I will find cheaper!
moneytothemasses.com/using-credit/loans/the-best-personal-loans

That’s a good idea - I tend to leave any extra money in my bills account anyway, but writing it into my budget will make things a bit more structured!

What are you training for?

I just ask. If you're going to be nhs once training is finished and you're nearly done. Can you manage with the car you have for now and then get a lease via work once qualified? That's what I did...

I’m training as a nurse. I had no idea you could get a lease via work, does it just come off as a deduction like tax/NI?

I’m probably going to work at the NHS but there’s also a chance I’ll go straight into a private hospital as I’ve been doing bank shifts there. I have been trying to struggle along with my current car, but it has an intermittent fault where the power cuts off (suddenly, with no warning) while I’m driving it. It isn’t often, but it feels dangerous and the garage have tried multiple things without success. It also doesn’t always like turning on - sometimes it takes multiple attempts to turn the engine on so I’m worried about getting stranded somewhere.

Gas is very cheap. Do you not have heating on much ?

6% is about average for that amount of money loaned

The more you borrow the lower the rate I have found

But yes you can easily afford lt in your budget

@Carquestion2729

I do mine via salary sacrifice. I was a single mum when I qualified and having to spend £15 a week on oil as my car was knackered and kept breaking down!

I'm awaiting delivery of my third lease car now. It includes everything bar fuel and drops my pay by £360-370 a month. It's always a brand new car delivered. So no need really for repairs. But new tyres are included and insurance :)

No, I rarely have the heating on - I’m in a new build which has more windows than walls and has constant sunlight, it’s too warm most of the time indoors. Heating hasn’t been on yet this autumn/winter, it hasn’t gone below 22c indoors.

Thank you for sharing your view re loan!

OP are you paying interest on your credit card debt?

Yes £5 per month interest

Great to hear you are good at budgeting and thinking carefully about this.

I think the price of the car sounds reasonable - you are not going mad and buying something too expensive.

Would advise against the lease option another poster mentioned. It will cost you a lot more than you state as they will be new cars. You don't need a new car.

Your budget seems sensible I would ask the bank if you can make overpayments if possible and then if you can then do but as another poster said save up some emergency funds first- try to save £1k for an emergency pot.

Good luck!

Meant to ask. How long before your credit card is paid off?

Thanks for your reply @Madamlulu i have just checked the terms and conditions re overpayment, and it is fine to make overpayments - but if I clear the whole balance in one go, I have to pay 58 days worth of interest as an early repayment fee. So definitely feasible to make overpayments when I can, like when I do a bit of overtime at work etc

I should have the credit card cleared by may/june 2025 😊

Try to find out if you make overpayments then does the term reduce or does the monthly payment go down if you can.

The interest rate seems good btw. I would just encourage you to stay away from unsecured loans as much as possible to get yourself in a better financial position but if you need a car then you need it and the amount you are borrowing seems sensible.

Good news that your credit card will be paid off in 2025 you could then use that saving to build an emergency fund for yourself - try to push yourself to do this as it will help you to not have to get credit cards in the future if something unexpected comes up.

Thanks @Madamlulu ill find that out before I apply, definitely would be good to know.

I’ve always been very wary of loans and avoided them - I save up where possible, and I’ve kept my current car as long as possible but because it has a few faults now it’s costing me more money to maintain than I think a newer car would (the last 2 MOT’s have cost £800 and £400 🤦🏼‍♀️) it feels like throwing away money because I know I won’t have the car much longer.

Good idea re emergency fund - I’m going to start setting money aside for this. I do have around £900 in a savings account, but that was more of a pot of savings for DC which I don’t want to touch. Having a separate emergency savings will be a really good addition and give a bit of breathing room

I agree that the time seems right to replace your car. I also agree that hanging on to it and running it into the ground was the best thing to do financially but it's just tipped over the point where it's not a good financial decision to hang on to it but a bad one - literally throwing good money after bad as you say.

You sound very sensible with money and this will work hugely in your favour in the future. Carry on with this attitude and you will build financial security for yourself and your child.

I would look at finance offers with car dealerships to see if they have better rates but otherwise it seems like you're being sensitive

... being sensible and can afford the payments.

The Interest rate on the loan seems really unfeasibly low. I’d check that out. My credit score is almost at the max and I could not get even close to that interest rate for an unsecured loan.

your budget is pretty tight and there are a lot of things not accounted for in it, including:

car running, repair and maintenance costs. £120 pcm for insurance, fuel, tax, MOT, Annual service and routine maintenance is nowhere near enough. I’d multiply that by at least 1.5x to be honest. There will always be break pads needing replaced, a couple of headlight bulbs every few years, a flat battery now and again, etc etc. breakdown insurance is a must and not much over the course of a year but needs accounted for.

Yours and your children’s clothing, gifts for your kids’ birthdays and other celebrations like Christmas/ Eid/ etc, friends’ celebrating, any socialising for you or your kids, holidays, kids’ pocket money, any vet care aside from routine pet costs, animal holiday boarding, kids’ holiday care costs don’t seem to be accounted for. It may be you don’t do any of these which is fine but most people do.

your energy costs are very, very low unless you are in somewhere with communal heating or live in a passivhaus.

Im in a not dissimilar position to you income wise, and probably have about 25% more a month coming in. On my income I could do a £150 car loan but am less sure about on a take home nearly 1k less per month.

you could go for a smaller, yet still reliable and economical car maybe?

Not connected to the car but get that swapped to a 0% card, loads of deals around at the moment and you’ll have no issues getting it approved if you have a good credit rating.