A question about : Bit of help/guidance required
My girlfriend purchased a new car in December. Up until this point her finances were fine and she was coping pretty well, even starting to save money for holidays and extras.
The payments started to go out of her bank in January for the car and since then every month she has gone into her Ј500 overdraft, without my knowledge. We recently used the money from the savings account to pay for a holiday.
Yesterday she got a call from the bank to say she had gone over her Ј500 limit on her overdraft. She only gets paid on the 29th of this month. She's been into the bank today to increase the overdraft to Ј800 to avoid charges.
She is already paying Ј138 per month for a loan she took out 2 years ago, that still has 3 years to go.
My question is - would it be worthwhile to top up that loan to clear her overdraft? Apparently they will just keep payments the same but extend the term. Her wage would take her out of her overdraft this month, but then the car payment, the loan and other outgoings would bring her back into the exact same situation. If she could cut the cost of the car she'd be able to get out of the overdraft eventually but can't see how this is possible.
We are also due to visit the company she bought the car from as they might be able to either settle with the finance company and sell the car (of course leaving my girlfriend with a lump sum) to find. Or in their words place her in a cheaper car which I assume would also lead to another lump sum being owed.
The car is the cause of the trouble. But we don't really know what to do about that and don't really trust the garage as they now have their money and don't have to do much to help in my eyes.
Best answers:
- Was it a brand new car on finance or is it 2nd hand?
The problem with car finance as you probably already know is that you can't sell the car to pay off the finance as you dont own it. You could see whether the place you bought it from will buy the car back for a sufficent amount to pay the outstanding balance, hand car back and cut your losses. Sounds like whatever the car is simply isnt something that you can afford.
I wouldnt extend the loan if you can help it at all. - Car was "nearly new". Ironically because they woman who owned it to begin with couldn't afford it.
Only thought on extending loan was that my girlfriend is still being charged for anything over Ј300 on the overdraft. And if the bank can just extend the term instead of increased payments then she would be willing to do that as the payments are manageable (without the car!!).
The car company have said they'll take the car back, get a settlement figure and value the car. But experiences with them in the past haven't been brilliant and can't see them being much help. Will definitely call in just to see what they say though. They may surprise me.
Thanks for your reply. - About two years ago myself and my wife got a new 2nd hand car from a BMW dealership on HP, about a year ago we found out that we would be moving to london with my job so no longer needed the car.
My first thought was to take it to the dealer and see what they would offer for it - we got a suprise, although it was more of a shock! The most they would offer was 50% of what was outstanding to clear the HP!
In the end, we had to clear the HP with our savings and then sell the car privately - we sold it on ebay for an amount just below what was owed.
We learnt a very expensive lesson and will NEVER have car finance again. - What will happen is:
a. they buy back the car - for less than you paid. It may cover the finance JUST and leave you with no car and no lump sum - though no debt. If they cant offer the outstanding ammount of the finance they cant buy it back.
b. Place you in a cheaper car - in all probability this wont give you a lump sum either - it will just mean the finance is cheaper/month though.
Doesnt huty to contact them, but dont expect any capital from the car. It does soundl like a "nearly new" car was something that couldnt be afforded - but thats a lesson learned.
DONT top up your loan - you will end up going back into your OD as your outgoings arnt changing. You need to reduce costs.
Might be worth posting a SOA (as always) so people can see where you could cut back on your budget to allow you to afford the loan/payments. - Yes, agree with previous post. Taking out more debt to pay off debt generally just leads to you owing even more in the long run because the behaviour/issues which led to overcommitting yourself financially tends to continue. The best thing to do is reduce your outgoings. You may have to do this significantly by looking at what you eat, spend, cut any unnecessary bills, etc, & put every bit of money this frees up into paying off the loans. Car finance is such a trap......you often find the only way you can get out of it is to sell the car back to the dealer, but you don't get anything like what you still owe on it because of the interest. This is why my partner ended up in a situation where he was paying car finance on a car, but the sum he was paying also included remains of outstanding finance he owed on 2 previous cars. We finally got ourselves out of this situation by part-exchanging our 2 cars & going down to 1, but it took a long time to get shot of car finance. Good luck with it.......have a really massive attempt at reducing your costs & working to a budget first as it'll be a better option long term than borrowing more money.
- I have to question how much this car must be costing then if this is the cause of the issue. Have you spoken to your gf about the reason she keeps going into her OD? Is she simply spending like she did before the additional car repayments or spending more now than that.
Bascially your gf needs to start living within her means i.e making reductions in outgoings elsewhere to account for the car payments. I suggest she writes up a SOA to see where cut backs can be made.
Sorry, I hope I don't sound too harsh but I would have thought you'd have done the sums together before buying the car to work out if she could really afford it.
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