Can I get a car when I’m in debt?

posted by in Living with debt

Disclaimer: If you’re currently on a debt solution you may be breaking the terms of your agreement by taking out new credit. You should call your debt solution provider first to discuss any additional credit that you might be considering.

When you’re living with debt it’s important to keep your transport costs under control. But what if your car breaks down? What if you need one for work? Or you want a second car for your family? Can you buy a car? It’s something we get asked every day. 

Because everyone’s situation is different there’s no easy answer to this question. You can buy a car when you’re in debt but we recommend that you consider the following first…

Can I get a car when I'm in debt

Why do you need a car?

Firstly, is it essential that you buy a car? It might be if you need a car to continue working, or for health reasons. It might not be essential if you’d like to upgrade to the latest model, to buy one for your partner, or for weekends away.

Think about whether you really need to buy a car or if you can manage using public transport. If it’s essential for you, follow these steps.

Calculate the purchase cost

Buying a car can be expensive. From buying one outright, on hire purchase, or getting a loan, they’re one of the biggest purchases we ever make.

Can you afford to buy a car outright? Or, if you use credit to buy the car, can you afford to make the monthly payments? You may find that if you have a poor credit rating you’ll be charged a higher rate of interest on any new credit.

It’s also worth bearing in mind that by taking on extra credit, it may take you longer to repay your debts.

Top tip: If you haven’t already made a monthly budget you should do this now to get a full picture of your finances and the affordability of buying a car.

Calculate the running costs of a care

Calculate the running costs of a car

It’s easy to forget just how expensive cars can be to run. It’s a good idea to calculate the yearly costs for:

  • Road tax
  • Insurance
  • MOT
  • Petrol, diesel or electricity
  • Parking

Taking into account your car’s fuel consumption and your lifestyle.

How will a car will affect your budget?

When you add in the purchase and running costs of a car how does it affect it?

If you’re simply replacing an old car, your costs may not have changed. But, if you’ve not had one before it may have a big effect on your budget. There are many ways it might change your budget:

  • You may have reduced your costs, and can pay more towards your debts
  • You may have increased your costs, and need to make smaller debt repayments
  • You may have increased your costs a lot, and can no longer afford your debt payments

Get individual debt advice

We understand that everyone is different and there may be a good reason why you need to purchase a car when you’re in debt.

If it’s essential and is going to affect your budget negatively, you should get debt advice. You can do this online or over the phone. During your advice session you’ll create a budget, and look at your finances in detail to see if there’s a debt solution that’s suitable for you.

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Rebecca Drury is the latest addition to the MoneyAware team joining in November 2016, with a background in ecommerce and social media management. She enjoys live music, travel (especially trying local delicacies) and loves reading vintage sci-fi novels. She's an excellent dancer and loves researching money-saving tips.

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Tags Living with debt
  • Nigel

    I have read everything you have written regarding the “getting a replacement car”
    If when all this is done, and the finance stacks up, who would offer me credit/loan to get a car whilst I am on a debt management plan please ?

    • Wibble

      As the disclaimer states (and is true for my debt management plan with step change) no further debt i.e. loans or credit cards etc can be added.

      In the unlikely event of been offered finance it would be at an extortionate rate.

      • Stuart Brearley

        I think you will find easier to get a car loan than any other loan. If you don’t pay they just reposes is probably the reason why. Try Black horse car loans their very good and you will not pay massive interest.

      • Wibble

        Will keep them in mind, thank you. I would have to run it past Stepchange either way. At the moment I run around in a £200 car which will last till May next year. No chance of it going through another MOT sadly.

      • moneyaware

        Hi Stuart, we’ve moderated your comment because we don’t recommend any specific finance companies on the blog. We try to be impartial wherever we can and don’t recommend one finance company over others.

  • Jim Martin (bushylane)

    One way we got around the car problem, when our car gave up the ghost was to buy a cheap used car with a long MOT (cost us £450). We raised the money by going online for car scrappage and got £85 for our car – they came to collect it too. Insurance was reduced by £80 and the remaining money came out our annual budget (within our DMP) which we put by our monthly costs and pay when service/MOT is due. The car we bought lasted for 20 months and we kept within out budget. Before we bought the car we worked out public transport cost to get to work only would have cost £70 per month and that excluded other use for a car, shopping etc. So overall it worked out within budget. Recently the car we bought also needed work done which was more than the car was worth – so we did the same again, got car scrappage, worked within budget and got another used car with long MOT (this time it was a neighbour selling it and did not want to pay advertising costs – so got another car for £450. The important thing was having the reliability of having a car, no need for any status symbol, as long as it is safe, legal and roadworthy, that was all at that mattered – and we kept within budget. I hope this experience is helpful to others, perhaps we were lucky but it is worth consideration.

  • Heather Minshull

    I may be alone but I find this patronising. I work full time. I am on debt management plan. I travel 50 miles a day as part of my work pattern – too and from clients. I need a car and will continue to do so. I have my current HP calculated in my budget and when I need a new car, plan to stick to the budget when looking at HP. Must be in a negative mood – but am not overly finding these tips are helpful.

    • Innes Campbell

      How can we get hp or similar while our credit history is destroyed as my current pcp’s run out in two years. Any tips welcome.

    • Jim Martin (bushylane)

      Hi Heather, sorry you are feeling that any comments being shared are patronising and tips not overly helpful. Perhaps you may have been in a negative mood, understandably, but have another think you are not alone so a wake up call when others are offering ways to help. Have another think. On considering future HP for a newer car, you are just paying for considerable depreciation on next car you buy. If you think differently, get rid of HP, buy a cheap used car that is reliable, money saved can help pay off your DMP, keep you guaranteed that you have car transport that you need, which for you is vital. I can only offer this advice, but please do not indicate to those of us who are willing to share experiences as patronising and unhelpful.

      • Heather Minshull

        I was not responding to anyone on here Jim. I sometimes find the initial advice unhelpful when I look on a post title. The tips I refer to are from the general post and not the comments section.

  • Richard Gosling

    I agree with Jim Martin – the solution to needing a car if you have very little money is to buy an old used one. I’ve had a string of cars that cost me less than £500 each, all with at least 10 months MOT when purchased. The best ones were the more premium brands – BMW and Audi – even though they were older to start with they lasted longer, were more reliable, and needed fewer repairs, as well as being much more pleasant places to be! No need to take out any credit, no HP payments to make, negligible depreciation (‘cos it’s worth next to nothing to start with). Not worth spending money on regular servicing, a car will last at least 3 years with no servicing (if you keep fluids topped up) and it’ll be cheaper to buy another car than buy 3 annual services. The cost of occasional minor repairs will be far less than your credit repayments would be on a newer car. If it needs a major repair – scrap it and buy another instead.

  • Gill Griffiths

    It would be helpful to know if there are options for getting finance for a car after you have paid off a DMP? I will be finishing my DMP within the next month, but I understand my credit rating will be affected for 6 years.

    And yes, I understand that it’s best not to take on debt again, but without going too much into my details , my circumstances have changed and I can now afford to pay for a relatively new car without finance. But some of the 0% interest deals (with a 50% deposit) mean it makes better financial sense to take the deal, pay monthly whilst keeping the remaining 50% in a higher interest account. However, this would mean a credit check I assume…so is it possible if you have only recently finished a DMP?