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Car vs House: Which Should I Buy First?

With such a large sum of money at stake, you must make an informed decision.

 

Your dilemma is justified now that you’ve finally saved enough money to try your hand at a rather large investment. With all of the external influences influencing your actions, it’s no surprise that you’ve arrived at a fork in the road. Where do your priorities and financial reality intersect? With a car or with the property?

 

Some will argue that getting a car is a better option because it is less expensive, easier to maintain, and more convenient. Owning a car provides you with a sense of independence and excitement, knowing you can go wherever you choose without relying on anything other than your sense of adventure.

 

Yet, in today’s economy, with rising petrol prices and increased traffic, is a car truly the more practical option? Here are some of the reasons why buying a house might be a better first investment: 

 

Owning a car provides you with a sense of independence and excitement, knowing you can go wherever you choose without relying on anything other than your sense of adventure.

 

Yet, in today’s economy, with rising petrol prices and increased traffic, is a car truly the more practical option? In this article, we will discuss both options.

 

OPTION 1: BUYING A HOUSE

brown and white concrete house near green grass field during daytime

It’s the Australian dream come true. And it appears to be the most apparent choice for those wishing to invest their money.

 

If you’re looking to buy a home to live in, it won’t have the tax benefits of an investment property, but it will provide you with a roof over your head.

 

Perhaps the most significant benefit, if the mortgage is paid off or near to being paid off by the time you retire, is that your living expenses will fall at the same rate as your income (i.e. you retire).

 

As a result, it gives a method of matching cash flows.

 

Non-financial considerations in selecting whether to buy your own house include stability, long-term planning, the flexibility of conducting your own home upkeep, having no one to answer to (except perhaps your bank), and the freedom to use the space how you wish.

 

If, on the other hand, you’re looking for an investment property, you should know that it’s become a highly popular sort of investment in Australia for two main reasons.

 

To begin with, housing prices have often risen dramatically over time (particularly in Sydney and Melbourne). So if you’re looking into Inner West real estate, then it’s a great investment. 

 

The biggest advantage of purchasing a home is that you will be amassing an asset that will increase in value over time.

 

However, you should take the time to consider all of the expenditures associated with your investment. 

 

If you have someone ready to assist you, that’s fantastic, but you still need to be able to afford the other expenditures of purchasing a home, such as mortgage payments, interest rates, insurance, repairs, and utilities.

 

Young people should consider “saving as much as they can for a deposit,” whether for a primary residence or an investment property.

 

When you’re just starting out in your profession, you should think about whether you’re ready to commit to a mortgage.

 

You’re already in the system, and if something occurs, whether it’s a professional shift or something else, you’ve already made a significant commitment.

 

Consider the following:

 

  • First, save for a deposit: Most experts recommend saving at least 20% of the loan amount.
  • Your ideals, risk tolerance, and life stage
  • Determine where you can afford to buy so that you can live within your means.
  • Non-financial considerations include stability, freedom, and long-term planning.
  • Consultation with a reputable financial planner

 

OPTION 2: BUYING A CAR 

yellow car parked on the side of the road

You may consider purchasing a car to be more of a necessity than an investment.

 

You’ve probably heard the cliche that a car loses value the moment you drive it away from the showroom.

 

Unless you’re buying a historic Aston Martin or Ferrari (which are out of most people’s price ranges), automobiles are a depreciating asset and so aren’t a good investment in the traditional sense – however if it’s the only means to get to work, that’s a different story.

 

For the sake of comparison, deciding whether to buy a car or a house first may be influenced by your savings and income.

 

If a house appears to be a longer-term investment, it may make sense to wait and buy a car first, especially if it is the only way to move around.

 

Since an automobile is a depreciating asset, you must exercise extreme caution when considering car loan financing.

 

There are numerous advantages and disadvantages to auto financing, and if it were me, I would prefer to spend from my funds rather than borrow.

 

If an automobile was a necessity, you should “save up for it.”

 

A car is not often an asset that will appreciate in value, therefore it is critical to be prudent and limit the amount you are willing to spend.

 

To avoid financing, save as much as you can and try to buy it outright.

 

Hence the ability to repay the loan is not the only factor to evaluate.

Consider the following:

 

Establish a maximum price restriction and keep it in mind when looking.

 

  • Conduct some internet research — evaluate the value of your car by searching similar models online, especially used cars.
  • Consider whether the expense is worthwhile. Not only is the car’s price important, but so are the insurance and maintenance expenditures.
  • Consider the time of year you’re purchasing; sometimes there are exceptional deals near the end of the fiscal year, for example.
  • How much money can I spare? What can I pay off comfortably, and how much do I need to borrow?
  • Are the terms and conditions acceptable to me? Do I want to still be paying it off in five years?

 

Conclusion 

 

To help you decide, we’re rounding our list of the pros and cons of both options. At the end of the day, you’re the only one who knows yourself well and what you need. 

 

Pros and Cons of Buying a House 

 

Pros:

 

  • Having a home provides financial security later in life.
  • There are numerous tax benefits to owning an investment property.
  • For the last 30 years, the average return has been comparable to the stock market.
  • It is an asset that should appreciate in value over time.
  • One day, you may be able to use it as equity.

 

Cons:

 

  • If you start too soon, you risk damaging your credit record if you fall into financial problems.
  • The sum of money required to purchase the investment
  • Prices might fluctuate – they are not always increasing.
  • Opportunity costs – you may not be able to go out as much or take as many vacations.
  • There are financial costs involved (associated fees, interest, ongoing rates, maintenance)

 

Pros:

 

  • Mobility and freedom are enhanced, especially if you do not reside near public transportation.
  • A valuable asset

 

Cons:

 

  • It is also a declining asset.
  • There are continuing expenses such as registration, insurance, and fuel.
  • It will not endure forever.
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