You want a new car AND a new house. But you can’t do both right now. Which one should you tackle first, and which is the better investment? Of course, buying a car is cheaper, requires less effort, and delivers that intoxicating new car smell, but it’s not always the best financial strategy.
So if your heart says “car,” but your head says, “home,” here are a few talking points that may give your heart the nudge it needs to catch up with your head:
New cars depreciate around 20% after the first year then continue depreciating by 10% every year after that. A home? Expect it to go up in value by about 4% year after year. Currently, the appreciation rate is a whopping 14.5%! Translation? Buying a home is always the better investment.
The average U.S. car payment is $577. No doubt this type of monthly payment will tie up a good chunk of your budget. This could slow down (or stop altogether) your ability to save for a down payment.
If you purchase a car first, there’s a good chance the real estate market could shift by the time you’re ready to buy a home. Interest rates may be higher, and it may no longer be a buyer’s market.
If you have a car payment and miss just one, it could damage your credit score and hurt your chances of qualifying for a loan. After all, none of us knows the future (2020 taught us that much!).
One more thing. Ask yourself this: What will benefit you most 5 years from now? Driving around a 5-year-old car or resting your head each night in a home you planned for, saved for, and now call your very own?
If you’d like to chat about your next steps towards homeownership, send me a DM. I’d love to get to know you, hear your story, and share how I can help whether now or someday in the future.
Buyers
Should you buy your dream home or your dream car?
