How to afford next car //outstanding loan of £3400

[Applebottomjeans92]

I am wondering if anyone has advice/ideas of what to do.

Basically myself and DH have £9000 set aside for house works/decorating with bedrooms, living room and dining room left to do. We have to pay £1600 for a plasterer which is imminent. We still need a new bed, sofas, dining table set so am fairly confident we would need the full £7400.00. (£9000 - £1600)

Separate to this, we have a £3400 loan outstanding at my bank for a car which we no longer have - long story. There is 14 or 15 months left, £255 a month payment. Interest rate is around 6.6 %.

At the end of every month, after paying bills and having a little bit of spending money (£250 him, £200 me) we are squirreling away roughly £850 which each month we have been using towards the house, then we have Christmas. From end of December pay packets I/we need to decide where to allocate this money.

Sounds ok, but we are also trying for DC2, which is taking a few months but hence in 9 months/1 years time. This will then obviously make my earnings lower and also we'll be paying nursery costs again - so this £850 a month we have spare will certainly not be forever.

I'm at a loss of what to do. I would like to get an older care maybe spend £5/£6000 but DH would like to get fairly new, perhaps spend £16,000/£18,000 and potentially benefit from a dealers longer warranty (Kia?).

I've had a quick look at our banks and for some reason we are not able to get interest rates of 6.6 again - it's more like 11% which I suppose if we have to we have no choice but I am just wondering if I am missing something - would car finance deals be better interest rates? Dealer websites this morning are showing me 6%, but are they similar to banks where they advised a lower rate then actually you aren't eligible for that rate.

I am thinking from the end of December the £850 a month we have free we chuck at the loan to get it gone, then by around March time we are clear to then get ANOTHER loan/car finance of say £18,000 to get our new car and keep that one for a very long time. If we can get a car loan of around £300/£400 a month we may just be ok if we are lucky enough to conceive DC2.

Do you absolutely need a car? I personally wouldn’t do car finance for £18k but it depends how comfortable you are with debt.

I’m not a financial adviser, but have you considered using the cash to pay off the car loan straight away, to avoid the interest, and then getting a 0% credit card to cover you for purchases such as new furniture?

Also definitely think about get yourself on Facebook marketplace/gumtree etc for furniture. Not including our mattress which we bought new, I think we probably furnished our two bed for less than £1,500. We got our bed on gumtree and it was brand new (literally never been put together), should have been £500+, we paid £110 etc etc. Then even if you replace them later on with brand new things, you’re still giving yourself a bit of breathing room now whilst you have other big expenditures going on.

If it was me, I’d clear the loan right now with your spare money for the house, which would leave you with 4000 for your bed/sofa/dining set, do these in priority order, bit you will now have £1100 a month spare so you will soon be able to afford the rest of the things (or just cope with a cheap/2nd hand dining set or bed frame).

On the car id save as much deposit as you can then use a bank loan (not special car finance) to buy something reasonable quality and low mileage and then pay off over 3-5 years and keep the car for a while. For example you can borrow 10,000 from Tesco over 5 years at 6.5% and about £200 per month.

@SBHon we can make do temporarily using trains and DH work van but this is only a 3 seater (convenient for school runs/dropping me to work when hes able) but I would not be able to be without a car long term. the train times are a bit inconvenient and we have family members who live some distance away.

@OchreSwan I didn't think about getting a 0% credit card for the house spends- only the car, and when googling/mumsnet people have said some dealers won't accept the 0% credit card. thank you, i will look into this! also will defo check out gumtree /facebook! we have already paired back our house plans while our priorities have changed a bit (ie deciding to have DC2!) so yes its just giving us breathing space over these expensive nursery years that are (hopefully) looming ahead.

i could use the £7400 to pay the loan and then the remainder as a decent deposit for a car, while taking out the car finance...

Do you definitely need all of the £7400 for your house? A bed, dining table set and sofa don’t have to cost that much, and you can get second hand for now which is much cheaper. I would use some of your cash as a deposit for a car and get the finance costs down. As you say you have £850 a month spare now but if you have another DC most of that will be used on reduction of hours and childcare. You probably need to make a choice of what to prioritize here.

@Spacecrispsnack thank you for the advice!!

do you need to already be a customer of tesco to apply for their loans? (ie have a clubcard/bank account with them?)

Not necessarily but I think club card holders get a slightly preferential rate. Bank loans always generally cheaper and more flexible than car finance from garages.

@Overthebow its the decorating too, at the moment our main bedroom is stripped and we have the paint bought ready to use. we then wanted to get a new bed, or at least a mattress as our current one is 9 years old.

also carpets.

for our sons bedroom it will be lining paper, paint, carpet, new mattress at the minimum.

then we do need to do the living room and dining room but I think I am planning to wait until next autumn to do this (my DH has a very busy hobby during summer months, and I am sick of talking house stuff since its been non stop kitchen house chat since August) but that will be furniture as well as sorting some electrics, the state of the walls, ceiling (probably plastering costs for both of those rooms)

its the first decorating we have done in this house as we moved in so it needs decorating and modernising here and there.

(as an aside to posters, we obviously bought this house prior to our existing car going wrong and deciding to try for DC2, we have already scaled back our plans in the decorating/modernising for these few future years)

You need to get out of the habit of buying cars, especially expensive ones with debt. Especially at the same time as spending significant money on home improvements and introducing extra costs of another child.

If you do all of these, you're going to feel like you're struggling for years to come and will get into real trouble quickly if anything goes wrong - job loss etc.

You need to give up or scale back on one of these - assuming you don't want to not TTC again, so you really need to pause the home improvements or spend as little as possible on a car and certainly not one that costs £18k of debt.

You pay off your loan, spend about £1k on a new bed and buy second hand dining room table and sofa.

Before you pay off the loan, make sure you actually gain by paying it off early, - get a forecast of the settlement/redemption amount. No point paying it off early if you're going to be charged the same as if you let it run it's course. There needs to be some kind of "discount" for early repayment, which can then be compared against the interest you'd earn if you saved the money rather than using it to pay off the loan. It'll depend on the terms of your loan.

Why the polar opposite difference between car purchase options? You could probably get a perfectly good used car for £10k or less than will last a good few years (as long as it's relatively low mileage, full service history, get it checked by AA or similar etc) and you can usually get a 1 or 2 year warranty from the garage. I'm not sure you're in a financial position to commit to a brand new car that you don't actually need and can't really afford, especially if you have a new child this time next year.

Buying or leasing new sounds like more vanity than sanity in your circumstances.

But you can't actually afford a car at the moment, when you take into consideration the costs associated with another child, so it's what you choose to prioritise. None of the house renovations are essential. So what is more important to you, the house renovations, a second child, a car, or your current lifestyle (you and DH have £550 spending money a month)? You likely can't have all of these without getting into further debt and running the risk of not being able to afford it all if you have a second DC. I'd pick 3 of the 4 of these and postpone the 4th to a time when you have more money.

@Bjorkdidit thanks, just as a bit of background, we bought our car in 2016 for around £5,000 and kept it for 9 years.
it broke and was beyond repair in 2023. At the end 2023 we took out a £12,000 loan for a newer car, which we were intending to keep for another 9 years and pay that loan off.
that car was a total lemon with no recourse from the garage. we have since got rid and have to swallow the loan that's left from it.

these things happen

I would pay off bank loan asap.

pay bill already done, and then do essential decor needed. Do as much painting etc yourself will save a fortune

Buy secondhand furniture, you can’t afford brand new expensive stuff right now.

then hopefully you have some money left next year. Do not buy new furniture until you have built savings back up and sorted car and baby

@taxguru polar opposites indeed!
I suppose its because i would rather get a cheaper car and therefore less debt however as DH says with a newer car you get the benefit of a warranty.

further Q- would paying off the bank loan maybe affect the interest rate of a new loan they would offer me? (in time)

I'd recommend you have a look at Dave Ramsey Baby Steps

Tbh I would buy a dining set second hand. You can pick up some amazing bargains. I got an oak rectory table and 8 chairs for less than £500 they’d forked out thousands and fancied a change. I’d probably buy a nice sofa second hand too.

I think you tell your DH yes a new car would be lovely but we can't afford it. We can maybe afford £8k maximum. Also instead of taking £250 and £200 for you per month to spend maybe both cut back to £150 each per month for a while. That would take your £850 left over each month to £1k left each month to pay off the previous loan. Cut right back on Xmas this year, it really doesn't matter. Only buy needs not lots of wants. Your DC is small so DC won't even notice. Also it doesn't sound like you can afford another baby ATM. Why not wait for another year so you can stabilise your finances first? Once you are in debt it is very hard to get out of and if you have another DC you'll be on mat leave so less money coming in then nursery fees.

Pressed too soon. Also instead of buying all new furniture buy some pre used items. When my DC were small we never bought new furniture, so it didn't matter if it got ruined. When DC were older and we could afford more we got nice quality furniture.

My priority would be to pay the car loan off. Keep saving and slowly buy the things on your list every couple of months. As pp said you can pick up decent second hand furniture on eBay.

Pay off the car loan. Buy a cheap car. Do some DIY.

Priorities isn't it.

Needs vs. Wants.

You WANT a new bed frame/dining room furniture/sofa but they don't actually need to be new.

Carpets anyone selling large offcuts/seconds? We have a reclaimed building materials place near us that sell room sized offcuts for £20, I paid a fitter £70 - £90 for a 4x3m room instead of probably £400.

Mattresses don't have to be expensive if you shop around. Unless you need John Lewis gold plated ones 😁

If you NEED a 'new' car and that's going to benefit you much more. Unless of course you're happy with walking everywhere.

Haven't read the full thread sorry if repeating.

I think I would prefer to use savings for paying off the car lone now and use 0% credit card or 0% store credit for buying furniture.
You're probably paying more in interest on your car than you are making in interest in your savings so it always makes sense to pay debts off first

You can get a 2nd hand car from a main dealer that comes with a comprehensive 1 year warranty (and low mileage and full service history and probably under 4 yrs old) for under £10k if you choose the right kind of car.

There is absolutely no need to be spending or borrowing £18k for a reliable car.

I agree that using your saved money to pay off the existing loan and then using some of the rest and a bank loan (as little as possible) for a car would be a good idea. Whatever is left can go on the house.

What will make a big difference to you over the next few years (esp if earning gs drop due to another baby) is taking on as little debt as possible. Look for a newish, reliable car…..but look at which models can be had for less.

So don’t start off thinking £18k for a car. Look to save on the car. Look to save on doing up the house. Look to save on everything, rather than thinking you should soend everything you have. It’s a different mindset, but one which will out you in a better more secure position in 5 years time. You have to think a bit more long term and not just about the immediate wants and short term finance fixes which cost more longer term.

Id say the fact you’ve got some savings is really good. You’ve worked to build those up. Using them wisely to pay off existing debt and to ensure the next phase of debt is as small as possible is a really good sue of those savings. They are a bit wasted if you spend it all of the house and then need and take a big car loan.