Car repairs and servicing can add up to be a significant expense over the course of a year. When you are in an IVA and money is tight, it is vital to plan for these costs.
Included in this article:
- How do you pay for car repairs and servicing in an IVA?
- What if you have an unexpected bill?
- Can you scrap your car and get a new one?
How do you pay for car repairs and servicing in an IVA?
Before you start an IVA, you will have to agree a living expenses budget with your IVA company. Great care needs to be taken to ensure that you include a budget to cover all the expenses you are likely to incur.
You should find it fairy easy to list all your regular monthly costs. But expenses like car repairs and servicing happen less frequently – normally only once or twice every year. So what do you include in your monthly budget for this?
First think about what you paid last year for your car service. Include the cost of an MOT if you need one. Then add another £100 to cover extras such as new tyres. Once you have your total, divide it by 12.
This amount needs to be included in your monthly expenses budget. But most important of all, once your IVA starts, you must save this money each month. Only then will you have sufficient funds to pay for your car service when it comes up.
As a rule of thumb, an average 3-5 year old car normally costs around £350/year (£30/mth) to repair and service. This amount will increase the older your car is and also if you are driving more than the average of 1000 miles a month.
What if your car repairs are unexpectedly high?
When you’re in an IVA, it will not be easy to pay for unexpected car repairs. It’s likely that you will be living on a tight budget where every penny is accounted for. In these circumstances there is no easy answer for how to deal with extra costs.
Borrowing the money you need will be difficult, but it might be the only option. Most high street banks will not lend to you due to your poor credit rating. A high cost short term lender might help but the issue is always going to be how to repay the new debt.
If you are thinking of getting a short term loan to cover a car repair, speak to your IVA company first. One option to help with the repayment is to take a break from paying your IVA. Depending on how much your monthly payment is, a 2,3 or 4 month break might be sufficient to cover the cost.
Your IVA company will not like the idea of suspending your IVA payments so you can repay a new debt. You need to explain to them that if you have no car to get to work, the whole Arrangement might fail. So in the long run it will be better for everyone.
Don’t take a high cost, short term loan during your IVA without first getting agreement from your IVA company and making a plan of how you will repay the debt.
Can you scrap your car and get a new one?
You might decide that the cost of the car repairs you need are more than the vehicle itself is worth. In this situation you might prefer to scrap the car and get a different one (or sell it for what is worth).
Depending on how much you plan to spend, you could cover the cost of buying a new car by taking a payment break from your IVA. But realistically, this would only work for very low value vehicles.
You might want to consider getting car finance. Despite your poor credit rating, there are a number of so called sub prime finance companies who might be willing to lend to you. However, before going ahead you will need to get agreement from your IVA company.
They will (quite rightly) want to understand how you will be able to pay for the finance. Perhaps you can make savings elsewhere in your budget or earn slightly more money each month. Your IVA company won’t want to reduce your payment, but they might be prepared to help if the alternative is the possibility of losing your job because you don’t have a car.
Rather than getting a new car finance in your name, perhaps your partner who has a good credit rating might be able to take it on for you. This could make the agreement more affordable. It would also not need the agreement of your IVA company.
Need help with starting an IVA or struggling with the one you are in? Give us a call (0800 011 4712) or complete the form below. The advice is free and confidential.