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Can I get car finance while on a Debt Management Plan?

Yes, you can but there are some things to consider. Being on a debt management plan (DMP) can make it difficult to be approved for car finance due to it impacting your credit file. We want to help you understand the process of applying for car finance whilst on a debt management plan.

The Process

When you’re in a DMP, you are still eligible to apply for finance. However, you will be advised to contact your Debt Management Firm or Debt Advisor to discuss the finance to ensure it is affordable. Any additional expenses for a car have to be managed within the plan.

Looking for a new car can be a timely and costly process, especially when you’ve got personal problems that could potentially stand in the way of you being able to get the car that you want. 

Poor credit or having no credit at all can have a big impact on your eligibility for car finance, as can a CCJ or an IVA. If you’ve had trouble managing your credit before, it’s possible that you’re now under a debt management plan (DMP), which can sometimes lead to even more roadblocks to the car finance process. we aim to provide everyone with the platform they need to get themselves back on the road, no matter whether they have bad credit or not. Below you can find a wealth of information relating to debt management car finance deals, including how to apply for a car finance agreement when you have bad credit and how to structure your credit arrangement and payments.

Things to consider before buying a car

If you’ve been granted the opportunity to look for a car by your debt management plan provider, you’ll want to ensure that you’re finding a car that’s financially viable in line with your current and future earnings and outgoings. To do this, there are a lot of different factors that need to be considered – by taking a detailed look at these, you’ll give yourself the best chance possible of being able to keep up payments, trim down your debt, and build up your credit score.

Before thinking about buying a car, it’s important to research all the associated costs that come with owning a vehicle, to make sure it’s affordable for your current situation. To help with this we have highlighted some common costs associated with owning a car: Finance, Insurance, MOT, Road Tax, Fuel, Ongoing maintenance costs (replacement tyres or general repairs).

Some of these costs are monthly and some are annual. However, all are necessary to run a healthy car and worth considering before purchasing.

Being on a debt management plan will undoubtedly impact your credit file and this is one of the main reasons you might struggle to get a car finance plan. 

Can I have a car during a Debt Management Plan?

At some point during your debt management plan, 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.

What is a Debt Management Plan?

A debt management plan is something that will be put in place with a DMP provider in an attempt to help you to regulate and manage your outstanding debts in a more responsible and visible way. Debt management plans are suitable for people who have debts that are seen as non-priority – this covers many different types of loans and credit that you might already have such as the following:

  • Credit cards or store cards
  • Overdrafts
  • Personal loans
  • Borrowing from family and friends
  • Catalogues, home credit, or in-store credit

Whilst this is great for paying off certain debts, there are others that a debt management plan won’t be able to help you with – these are priority debts like:

  • Council tax
  • Gas and electricity bills
  • Child support and maintenance
  • Income tax
  • National Insurance
  • VAT
  • Mortgage, rent, or loans against your home
  • Court fines
  • Essential hire purchases 


Your debt advisor will structure a DMP that works alongside the amount that you’re earning each month in order to start reducing the amount owed in the most effective way. To do this, you’ll pay a monthly fee to the DMP provider, who then pays money to your creditors for you – this way you will not have to structure payments yourself and you won’t have the chance to spend the money irresponsibly before taking care of your debts first. The payment made to your creditors will be determined by your debt management provider, which will take a look at your incomings and outgoings to ensure that the amount is feasible on a consistent basis.

Who would need a Debt Management Plan?

A debt management plan would be useful for people who are struggling to keep on top of their debts and credit accounts. Through the use of a debt management plan, you’ll be able to hand over the responsibility to someone else, relieving a bit of the stress whilst ensuring that regular payments are going to be made to help reduce the amount of debt you have associated with your credit file.

Debt management plans are a suitable choice for those who have non-priority debts, such as overdrafts and credit cards, as this is the only kind of debt that can be managed using a DMP. If you’re looking to pay off a priority debt – this is things such as mortgages, council tax, or court fines – then you may need to look into a different way of paying.

Having a debt management plan could help you to pay for your bad credit car finance plan too, allowing you to keep up regular payments on your vehicle.

Debt management plans are usually a great option for people who can only afford to pay each of their creditors a small amount each month – often in these scenarios people feel pressured to pay off their most urgent debt, forgetting about their other debts, which means certain creditors are left with no repayment that month. A debt management plan with help you to ensure that all of your creditors are gradually being paid off in smaller chunks; whilst this may be a slower way to pay your payments, it does mean that all of your debts are gradually reducing with a payment plan that is feasible in the long and short term.

A DMP makes it easier to pay off your debts as it takes the confusion out of the situation – you simply make one lump payment each month and this is then shared out amongst your creditors to ensure that they each receive some reimbursement every month. Your DMP provider will arrange this with your creditors and will be in charge of determining how much money goes to each creditor each month, meaning you don’t have to worry about calculating that on your own.

A debt management plan also offers you the chance to start reducing your debt without taking out more credit, which is a major issue with many of the other debt reduction methods. This may mean that you are in debt for slightly longer as you are paying it back in smaller increments, you will see your debt reduce without first increasing, which will help you to improve your credit score while reducing your debt.

Who Is Eligible for a DMP?

To be eligible for a debt management plan, you must meet a set of criteria first. This is to ensure that only people who need a DMP are given one, allowing others to manage their debt on their own. The criteria are as follows:

  • You must be indebted to a minimum of two creditors, if you are in debt with just one creditor it is unlikely that a DMP will be required
  • A minimum debt of £2500 – debts lower than this do not require a debt management plan
  • It is also vital that you have a regular monthly income when setting up your DMP – your provider will likely arrange a plan based on regular income amounts, but without a regular income, it will be incredibly difficult to make an arrangement with your creditors.
  • At least £80 disposable income per month – if you do not have at least £80 disposal income per month, it is unlikely that you will be able to maintain regular payments on your DMP without putting yourself in more debt to do so.
  • You must also have a disposable income that is less than your contractual payment – if you can afford to pay your debts using your own disposable income, you will not be eligible for a DMP as you have the means to be able to reduce that debt by yourself. 


If you meet all of the above criteria, it could be time to look into setting up a debt management plan to help you start reducing your debts, such as your car finance payments, and improving your credit score.

Can you afford your car payment?

The first and most important, thing that you need to consider is whether you can afford to consistently meet your agreed-upon payments for your new car for the duration of the contract. When signing up for a finance deal, you’re agreeing to a credit arrangement, which does mean that more debt will appear on your account – this adds to the amount of debt that your DMP will be managing, so you will likely be paying more into your debt management plan as a result. 

Are you eligible for car finance?

If you’re currently under a debt management plan, you’re likely to have a lower credit rating – this is because your debt is taken into account when scoring your credit file, with high levels of debt and the presence of a debt management plan or IVA on the file flagging as an issue. Whilst this can make it more difficult to be accepted for a car finance deal, it does not make it impossible; there are many specialists who provide services tailored to people with a bad credit score, offering bad credit car finance and debt management car finance plans that enable you to get the car you want at a manageable price.

One thing to bear in mind when looking for a car finance deal under a debt management plan is which kind of car finance plan you will be able to apply for. Your DMP will be able to assist you in payments for unsecured loans, however, secured loans cannot be added to your debt management plan. Hire Purchase agreements also cannot be added into a debt management plan – this is due to the clause that states ownership of the vehicle will revert to the dealership in the event of missed payments, which means that there is another alternative to paying this debt back. Debt management plans are in place to help you make regular repayments that are manageable in line with your monthly income that otherwise would simply go unpaid, which is not the case with an HP agreement.

In principle, this again can depend on the factor of necessity; if you have an existing agreement on a car that is deemed necessary, or you require a car in order to work or support vulnerable friends and family members. In these cases, your car will be deemed a necessary expense, therefore allowing you to set up a payment plan for the vehicle and add that into your monthly repayment plan set up by your DMP provider.

What happens if you don’t keep up with your payments?

Unfortunately, there are cases where the payment plan becomes too much – this could be for a variety of reasons including changes in employment or emergencies. In these circumstances, it’s important to know what will happen to your car. If you have not yet completed every payment in your payment plan, ownership of the vehicle will revert to the dealership – this means the car is no longer in your possession and you will be notified of the next steps in due course.

Get free debt advice today

You can get free debt advice from IVA Advice. While many people may be wary of asking for help, it’s important to take responsibility for your situation. We will offer you a plan that deals with all aspects of your financial situation, including debt advice.

If you feel like there’s nothing you can do to deal with your debts, and you want debt advice on writing them off and doing monthly payments, then contact IVA Advice. We can help you with a debt solution, debt management or IVA proposal.

We’ll help you to prepare a budget and work out what options there are to deal with your debts. Call IVA Advice and chat with us, so we can understand the best way to help you.