How did I miss this! Back in August a blog called 'online debt consolidation' published a post about making the most of the Car scrappage scheme. All sensible so far then, if someone is going to give you £2k for a car thats only worth a few hundred, then it makes sense.
Thats where the sensible comments stop though! All the time I've been writing this debt management blog, I never would have thought I'd see a supposed debt consolidation advice website suggest that someone go and buy a BMW, and remortgage their house, just to take advantage of the car scrappage scheme!!!
The first thing that struck me was that a debt based informative site would suggest spending money on a new car. I di some research, and the cheapest 3 series BMW is currently £22155 otr. So, they are suggesting that people suffering with debt problems, paying off debt management plans or living with IVA's should go and blow £20k on a car. Brilliant.
I then looked at the 'benefits' of spreading the cost of the car by adding it to your mortgage. So, to start with you've got your £2k scrappage money, so we'll take that off. £20155 to add to your mortgage then. Lets have a look at how much that would cost If we remortgage over 25 years, and get a pretty good rate at the Nationwide at the moment of 4.5% APR.
Borrowed - £20155
Timescale - 25 years
APR - 4.5%
Monthly repayment - £112.03
Interest - £13453.41
Total paid - £33608.41
In a nutshell, it would cost you £13453.41 over the period of your remortgage to save yourself £2000 in scrappage.
Doesn't sound so brilliant now, does it! Most of our debt management clients, and people that come to us for debt advice understand that when times are tough, and the debts are building, buying a brand new BMW isn't really on the agenda. But there are some that would fall for this ever so slightly flawed advice.
If you are struggling with debts - don't buy a BMW, call MRA Debt Help to speak to one of our debt
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