Should I get a car or a house first? Many people are always at a crossroads in providing an answer to this question, which seems simple, but it’s not because both are priorities.
This blog post will aid you in making the right decision if you’re contemplating whether to buy a car or a house first. So read on.
Buying a car or a house first: what to consider
In determining which to spend on first between the two, you must put some factors into consideration:
1. Appreciation and Depreciation rate of both assets.
This consideration is the most tangible point of people who choose a House first. Also, this point is why the majority of personal finance experts prefer to choose a house purchase as the first option.
Like most other real estate properties, the value of a house increases rapidly. Even though the market fluctuates from time to time, it doesn’t very much affect houses as their value usually appreciates with the passing of each year.
The reverse is the case for a car, the rate of car depreciation is quite alarming. A fact is that a car starts depreciating the moment you drive it out of the showroom. After some time, the same car will be worth roughly 30 percent of its original price.
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2. The Maintenance costs
The maintenance cost of these two assets differs from each other. The cost of maintaining a house is cheaper than car maintenance.
Unlike cars, houses do not require every day repairs. Moreover, most damage can be mended by the homeowner without professional help.
In addition, the maintenance costs spent on your house will be money well spent because any improvement you do to your home, such as increasing the kitchen size is for your advantage as it will help increase the value of your house.
Most experts estimated the annual maintenance cost of a house to be between 1 to 4 percent.
However, the maintenance cost of Cars is high because cars need to be fueled and serviced regularly.
In addition, the older the car gets, the more of a liability it becomes. At some point, you’ll find yourself spending a lot of money on servicing, repairs, and replacement of spoiled parts due to wear and tear.
Worse still, some improvements on the car may even make it harder to sell when you want to dispose of it.
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3. Income generation potential
There are many profitable ways to generate income with houses, such as sharing your parking space, turning your home into a set, renting a roommate, selling goods, and rendering services. With the income earned, you can even buy a car. Thus your house is a long-term wealth creation avenue.
While it’s also possible to generate income from cars, being a depreciating asset makes the income generation potential lower than that of a house. For example, you can engage in ride-sharing and cab services like Uber. However, this will only generate short-term income for you because as the car ages, you might be spending more on maintenance.
4. The Essentiality of assets
Three are the basic needs of human beings: Food, Shelter, and Clothing. It’s important to fulfill these basic needs. Living in a rental home does eat up a huge amount of money that a year’s rental fee adds up and may require adding a little amount to it to get land.
A house can never be termed as a luxury because it’s an important need.
But Car to some people is a luxury and to some is a necessity. If you’re in a relatively urban area with the availability of adequate public transport, a car can be considered a luxury. However, if you live in a small town where the distances are too much with inadequate public transit, it may be considered a necessity.
So which should you buy first: a car or a house?
After putting the above factors into consideration, you also have to ask yourself some questions which go thus:
Are there better options?
You can look for better alternatives before buying a car or a house first. For example, is it easier to rent apartments or live with your family instead of buying your House? Or, will getting your place and starting the payment of your mortgage be a better option than paying rent on someone else’s property?
Convenience and easy movement are two advantages of having a car. These are important for a business person or any other person but the emergence of cab-hailing services like Uber created cheaper and more convenient options. They can be used for deliveries and getting supplies also.
Which one is more prudent to get?
You have to ascertain the impact of any financial commitment on your business before you engage in it. For example, a house requires a lot of deposit compared to a car. Also, buying a home may mean immersing yourself in a long-term financial commitment that may take many years to attain. Will you be able to do that?
Conversely, purchasing a car is a shorter financial commitment and you do not need lots of down payment to get a car. You can even pay off everything at once in some cases, but the question is will it add value to your business?
Is my credit score healthy?
This is a final question for someone that wants to acquire a house or a car on loans as most people do.
It is essential to consider your credit score before choosing which to get first. For example, for a mortgage loan to be approved, you need to have a good credit score.
However, getting a car loan is much easier, so if your credit score isn’t good enough to get a house loan, you may start with getting a car loan to boost your credit stand, and then you can get a house later.
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As I stated earlier, most people, financial experts included, assume that getting a house first is the best choice. However, while it could be true, it isn’t necessarily the best option for everyone. It all depends on the individual situation.