Money Milestones: Should You Buy a New Car or a New Home?

Buy a new car or house?So you’ve at a financial fork in the road. You have enough money to put down on a car, but you can also put down a down payment on a house. What do you do? While it might seem obvious at first (buy the house), it’s not. Here are some questions to ask yourself before you go headlong in either direction.

How Long Will Your Current Car Last?

How long will your current vehicle last, really? That’s a question most people don’t ask themselves seriously, or they underestimate the longevity of their vehicle. Most cars can be driven in excess of 200,000 miles, with regular maintenance.

But, many people don’t like doing routine maintenance and rationalize the purchase of a new vehicle when theirs inevitably breaks down.  This is typically not a worthwhile investment.

Because almost all parts on a vehicle can be bolted or screwed on, the only real intractable problem is rust or damage to the body or frame. Even catastrophic engine failure can be fixed with $2,000 or $3,000.

Related: How I saved $39 in less than 10 minutes!

But, at this price point, many people choose to purchase a new $15,000 or $30,000 vehicle – yet with an engine overhaul, you can get a ‘new” car for a few thousand bucks. Economically, it makes sense to keep driving the old car until it physically can’t be driven anymore.

Do You Really Need More or Less Room Than You Have Now?

Sometimes, people buy homes because they believe they need more space, but do you really?  Consider what you’ll be gaining in addition to the new home – you’ll have more square footage to clean, more responsibilities, higher payments, and higher taxes.

This has to be balanced with a real need for the added space. If you’re having a family, and you need the extra bedroom, it may be a moot point. The new home could be warranted. But, if you’re just in love with the idea of owning a home, consider what you get out of it vs. staying where you’re at now.

Maybe you’re downsizing, in which case the decision is whether you need less space. In these situations, you’re deciding on whether you want to give up space in exchange for more money. It can be a beneficial move, but it can also mean that you don’t have as much room to keep all of your current belongings.

So, a downsize isn’t just in terms of the house itself – it also means you may be selling a lot of your personal things. Do you really want to do that?

What Will Your Living Expenses Be, and Does It Make Sense?

If you purchase a home, what will that do to your current living expenses – make them increase, decrease, or stay the same? This could have a significant impact on how soon you can get a new vehicle.

What if you stay in your current home or apartment? Will you be able to continue working – what if you need to commute farther than is sensible or reasonable?

How Will A Home Purchase Affect Your Cash Flow?

If you put a down payment down on a home, it’s going to affect your cash flow, but how? Do you make enough income that you can replace the savings quickly? Or, will you be struggling for years to recover?

How Will A Vehicle Purchase Affect Your Down Payment On A Home?

Some used cars in NH don’t cost that much, like those sold by large dealerships like Merchants Auto. But, if you’re going to a smaller dealer, you might be surprised by the markup. How will all of this affect your down payment on a home, assuming you really want a house?

Are You Looking For Short-Term Appreciation On Real Estate?

If you’re getting into a home because you think you have a shot at making some quick appreciation on the buy, this could be a good move – especially if you intend on staying in the home for a while. There’s nothing quite like getting in at a true market bottom and riding it all the way to the top.

But, the annual appreciation on your home might be offset by the finance charges and fees you pay to start the mortgage (or refinance periodically for home repairs).

Really, what you need to do is consult with a real estate professional about the trends in the area you want to buy. You also want to make sure that it still makes sense even after all of the finance charges and commissions are taken into account. Those can be a huge chunk of money many people don’t realize.


Author Bio: Joseph Hale is a retired financial advisor and avid writer. He enjoys sharing what he has learned in order to help others be smarter with their finances. You can read his informative posts on many of today’s top websites and blogs.

About the Author Grayson Bell

I'm a business owner, blogger, father, and husband. I used credit cards too much and found myself in over $75,000 in debt ($50,000 in just credit cards). I paid it off, started this blog, and my financial life has changed. I now talk about fighting debt and growing wealth here. I run a WordPress support company, along with another blog, Eyes on the Dollar, which is another great personal finance blog.

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