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When thinking about choices and personal finances, it may not be clear which is the better decision, to buy a house or a car first. Depending on where you live, perhaps public transit is very convenient and accessible, so buying a car may not be a necessity. However many of us live in suburban areas where a car is a necessity.
It’s a dilemma many of us have faced and it can be a difficult decision to make. Both are necessary for most people and are both major financial commitments. If you choose to decide to go down the road of buying a car first, car finance providers such as Latitude can help with obtaining the funds to source a reliable car to meet your needs.
Keep reading below to learn more about the things you should consider when trying to reach a decision on whether to a house or a car first.
Situation
Are you single or have a family to provide for? Do you currently need a car to earn an income? How much do you have in savings? Are you prepared for the maintenance and upkeep of either a car payment or a mortgage?
These are all important questions to consider in your search for which to buy first. For a single person who lives near good transit links to work, then use public transit and save for a home down payment. For a person who does not have access to public transit, then a car really is the priority. It is not necessary to buy a completely new car. If you purchase a car that is three or four years old with fairly low mileage, then the car is a good investment.
Permanence
Are you sure of the area in which you’d like to live? Is your job a career or a placeholder before something better comes along? Many young people are waiting longer to get married and purchase a home because of finances. The cost of housing is rising higher than what many can afford until their early 40’s. In Australia, first time home buyers in their 40’s was up to 40% in 2015 compared to just 18% of buyers over 40 in 2011.
In some instances, a home purchase may become available that could work as a solid investment that is rented out at a profit. This is a great way to get on the property ladder, start earning extra money which can then be put into a second home or other projects.
Appreciation or Depreciation
In simple terms, a house will appreciate or increase in value, whereas a car will depreciate or decrease in value with age. So then buying a house would be the best choice, right? Not necessarily. If you feel ready to stay in one place for five or more years, then homeownership should be a consideration. While possible, it is not recommended to buy a home and then resell in less than five years. You may lose money on the sale if you must sell quickly. Renting gives you more flexibility depending on your life situation.
Which is the Right Choice for You?
In the short term, buying a car is the best choice. The only time this is not a smart decision is if you live in a large city. Then you can opt to rent a car or look into a car share service occasionally if you need to, but owning a car would be much more inconvenient and expensive.
Thinking about all the angles before making a purchase is the best approach. While some variables cannot be taken into account, buying a car is usually the first large purchase as a young adult and is a lower-risk purchase. Then buying a home comes later. However, it is possible to save and purchase a home for yourself or as an investment that can give you long-term financial stability. Talk to trusted family members and friends about your thoughts and make the best decision for your situation.