How to Decide Between Buying a Car or a House
Making financial decisions may be the hardest part of adulthood. If you are blessed with having a stable income source and a little in the bank, you must be wondering whether you should purchase a car or a buy a house first in Clarksville TN.
However, there is no straight answer to this dilemma. It depends on different factors like your most pressing needs, lifestyle, financial capabilities, outlook on the future, etc.
In this article, we will discuss some factors that will help you decide which one is the right option for you. Let’s get started!
1. Your Primary Requirements
If you can afford to rent reasonably with roommates or stay with your family but need a long ride to work, a car may be your primary necessity as it offers ease and convenience of mobility.
On the other hand, if you need a house in a new city where you have plans to build a family or a career, renting for a long time may not be a feasible decision. Instead, it is more cost-effective to get your property and pay your mortgage. Also, more convenient and cheaper options like Uber can be used for things like running errands and for shopping.
2. Your Ability to Afford
Have you saved enough for a down payment? Can you afford the monthly installments? Sometimes, we wish to get so much but can’t afford it. Therefore, look over your finances, and make a decision depending on your savings and the amount you earn now, not what you wish to earn in the future.
Usually, a house needs a bigger down payment in comparison to a car. Moreover, purchasing a house means involving a long-term financial commitment, which may need several years to accomplish. Also, there are other expenses including lawyer fees and insurance. Some houses need assessment and renovation costs as well.
However, buying a car is a less frightening financial commitment. It does not need loads of upfront cash to buy a car. In some cases, it’s even possible to pay at once. However, in the case of a second-hand car, some extra cost may be required for some repairs and repainting.
3. Your Preferred Lifestyle
For some people, the idea of renting a house is not an issue, but they despise the thought of riding on public transport. On the other hand, the fear of being homeless is more prominent for some people. Which style is yours?
4. The Area You Live in
If the area you live in Clarksville TN has a higher real estate value, it can be difficult to purchase a house as a first-time homebuyer on an entry-level salary. In such cases, obtaining a vehicle first might be a better decision.
5. Maintenance Costs
Houses do not need regular maintenance or repairs like cars. Moreover, you can take care of most home repairs by yourself without any professional help. Therefore, maintaining a house is much less expensive than a car.
The annual maintenance costs of a house in Clarksville TN usually lie between 1-4% of the value of the house. Also, if you make any improvement or update to your house, it will work to your benefit. For instance, adding an extra bedroom, or expanding or upgrading your kitchen will only increase the value of your house. Therefore, any investment in your house is money well spent.
On the flip side, cars need to be serviced or fueled regularly. Also, with age, a car becomes more of a liability. You may need to spend a lot of money on the replacement and repairing of parts due to wear and tear.
And the worst part is, you can not recuperate them later. Moreover, some upgrades can even make it harder for you to sell the car when the time comes to dispose of it. Consider these facts before making your decision.
6. Depreciation or Appreciation of the Asset
Generally, the value of a house keeps rising with every passing year, even if the market fluctuates from time to time. Therefore, as time passes, you will be building greater equity with every mortgage payment you make. Eventually, when you finish the payment, the house will be worth way more than the amount you paid for it.
On the other hand, cars are depreciating assets. It may give you the freedom to wander around with your family and friends, but its value depreciates the moment it leaves the showroom, and the rate of depreciation is remarkably high. With time, a car’s value becomes much less than its original cost. This is the reason why most personal finance experts recommend buying a house first.
7. Revenue Potential
Houses are an avenue for building long-term wealth. With a home, you may build equity on the property and invest that money in other projects. For example, if you need capital for your business expansion, you don’t need to look further than the house. Also, if it becomes essential, you can even spend that money to purchase a car.
In the case of a car, the revenue potential is much lower than a house as it is a depreciating asset. You can join cab-hailing and ride-sharing services like Uber to make some money, but it is for a short period because as the car gets old, you might find that you are spending more on maintenance.
8. Your Credit Score
If you intend to buy your car or house on loan, your credit score is a very important factor to consider. To get a mortgage loan, you need to have a very good standing with the credit bureau.
Conversely, it is much easier to get a car loan. Having no score can be an issue as the banks do not have any indicator regarding what sort of debtor you are. In such cases, getting a car loan can be helpful to increase your credit score.
The Bottom Line
So what is it going to be? A house or a car? In the end, there is no right or wrong answer. Whatever you decide, make sure it is based on hard facts like your current financial standing and future property plannings, not on emotion. Slowly but surely, everything will fall into place.
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