A car or a home?

At some point in your life you are likely to be faced with a choice, should I buy a car or a place of my own?

The answer is not always as straightforward as you first think it to be. There are a lot of factors to weigh against one another before you can say that you’ve made a considered decision. This blog isn’t going to give you an answer, but it will help you ask the questions that will make an answer apparent.

1. The Cost Factor: You need less upfront cash to buy a car and there is a shorter loan tenure, making this the less scary purchase. On the other hand, a car is a depreciating asset while a property will generally continue to appreciate in value.
2. The Commute Factor: If you are renting a cheap place with roommates, but have to endure a long commute to work then a car might seem to make sense. However, if you can find an apartment in a location closer to work and rather use public transport then that’s an alternate solution to your problem.
3. The Lifestyle Factor: There’s a big difference between what we want and what we can realistically afford. You need to ask yourself what you really need AND what will suit your lifestyle over the next couple of years while you are paying off your
   purchase.
4. The Employability Factor: A car allows you to be independent when you travel and can greatly improve your job prospects. But vehicles also break down and require running costs such as petrol and maintenance check-ups & servicing.
5. The ‘Hidden Costs’ Factor: Accommodation always has hidden costs; you would need to make sure that you can comfortably afford the bond instalment, the monthly levy, electricity, internet, water, property rates and insurance – all on your current earnings. The same would apply to a vehicle – insurance, running costs, parking costs, add-ons or modifications and repairs.

It’s a good idea to consider both of these options at the same time as you can make them work for one another. If you are getting an apartment with a garage that you don’t use then you could rent it out. If you want to pay off your car as quick as possible then maybe it’s worth moving into a smaller place for a while. If your finances won’t stretch to accommodate your desired choice then you either need to boost your earnings or cut your living costs.

Some people can’t stand sharing a living environment, while others wouldn’t step foot on public transport. This comes down to personal preference, but making a short-term sacrifice to benefit in the long term is part of what financial planning is about.

You need to be honest with yourself about what you need and why you think that you need it. Only then can you make a considered decision.