Can I have a car during a DMP?

At some point during your debt management plan (DMP), you may consider getting a car or replacing the one you currently have.  If you already have a car, there are several things you’ll need to consider.

While you’re on a DMP it’s important to keep your transport costs under control.

It’s not against any guidelines to buy a car during your DMP. However, your DMP agreement is likely to state that you must not take out any additional credit without speaking to your DMP provider first.

Before buying a car, it’s important to make sure that the associated costs are realistic and affordable. Buying a car is likely to affect your overall budget, as you’ll need to factor in the costs involved. Once these costs are known, you’ll need to review your budget to make sure you can cover the costs you already have.

Car costs include:

• Road tax
• Insurance
• MOT
• Petrol, diesel or electricity
• Parking
• 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 make monthly payments on your road tax if this is easier for you. 

Is a car right for me?

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 some 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. Once you know what you’d spend in each scenario you can make a more informed decision on whether or not a car is right for you.

No one person’s situation is identical to another person’s. You should think carefully about your needs and responsibilities, and think about how owning a car could improve your situation.

You’ll also need to know how you’re going to cover the cost of purchasing a car, as buying a car can be expensive. From buying one outright, or on hire purchase, or getting a loan to cover the cost, they’re one of the biggest purchases you’re likely to make. Again, you must talk to your DMP provider before you take out any credit in order to buy a car, as it could affect your plan.

It’s worth carrying out a Hire Purchase Investigation (HPI) check to make sure that any second-hand car you’re considering doesn't have unpaid finance or debts associated with it. Please bear in mind there's usually a fee charged for this service.

However, as long as you weren't aware of an outstanding hire purchase agreement at the time you bought the vehicle, you'll usually be able to keep it.

I can afford to buy a car – what should I do?

It’s likely that your DMP was recommended to you because you’re not able to make the minimum payments on your debts. If you have the money to buy a car outright, you should get in touch with your DMP provider to see how you can deal with your debts first.

The terms of your DMP may state that you pay any increased or extra income into your DMP to pay your debt off quicker. Buying a car instead of paying your debts off may be considered unfair to your creditors.

Depending on how much money you have, you may instead be able to make full and final settlement offers on your debts. If in doubt, check with your DMP provider and they’ll look at your options.