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Can I get a car when I’m in 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 contact 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…
Is a car right for you?
Depending on your circumstances, you may find that a car is necessary or at least highly beneficial for you. For example:
- You live in a rural area with limited public transport
- You have to commute a far distance to work
- You have dependent children
- You have health problems
- You’re a full-time carer or have elderly or vulnerable relatives you visit frequently
Compare what you would spend on public transport to meet your needs versus the costs of having a car. By doing this, you can make a more informed decision on whether or not a car is right for you.
If, after weighing everything up, having a car is the most beneficial thing 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 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
- Petrol, diesel or electricity
- Additional vehicle warranty
- Maintenance costs, such as repairs and replacement tyres
Costs such as road tax and MOTs are usually paid for annually, so you’ll need to divide those by 12, to know how much to set aside in your budget each month. You can pay for road tax every month or six months, but it will cost you more over the course of the year than paying it annually.
Work out how 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
If you’re buying a used car at a low price, make sure you’re buying it through a reputable merchant. You should also check online to make sure that there are no parking fines registered against the car, or that’s it’s been previously reported as stolen.
It’s worth carrying out a HPI check to make sure that any second-hand car you’re considering buying hasn’t been written off. For a fee, HPI checks can also tell you if a car’s been in an accident or has unpaid finance or debts attached to it.
See if you qualify for the Motability Scheme
The Motability Scheme is a charity-run initiative which makes it easier for people with disabilities to lease a car, scooter or powered wheelchair in exchange for their mobility allowance.
To be eligible for the Motability Scheme, you need to be in receipt of one of the following mobility allowances:
- Higher Rate Mobility Component of Disability Living Allowance (HRMC DLA)
- Enhanced Rate Mobility Component of Personal Independence Payment (ERMC PIP)
- War Pensioners’ Mobility Supplement (WPMS)
- Armed Forces Independence Payment (AFIP)
If you claim any of these benefits, you must have at least 12 months’ award length remaining. Claiming Attendance Allowance doesn’t make you eligible for the Motability Scheme.
You can check if you’re eligible for the Motability Scheme on the Motability website.
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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