Why buy a house before a car

Lets face it, new cars are awesome!  Getting that nice new vehicle that you drive to work in is amazing.

When we are getting in to a position where we may be able to buy a new car there is something you need to consider.

What about a house? Many people ask why buy a house before a car?  Here is why…

They may think they can’t afford a house but they can stump up the cash for a deposit on a car. Sadly they are mistaken if they think it is a better use of their money.

Are you thinking like this? If you buy a car new everyone knows that as soon as you drive it off the lot it is worth less than what you just paid for it. That is just depressing to start with. The biggest issue is that you are leveraging a depreciating asset. What that means is that you just took out a loan that you will be paying interest on for something that will decrease in value over time. By the time that you pay it off you will have spent more than its worth new, and now that you own it, the car is only worth a fraction of what you paid for it. 

If you buy a house, even thought the value of the house may fluctuate over time real estate will always hold a certain amount of value and will go up over time. At the end of your mortgage you will have a valuable asset, not something that could be worth one tenth of what you paid for it. Even before you finish paying for your house you can leverage it as an asset, and that is my point. 

If you buy a car, you will have a loan. This will affect your  debt ratio. This means that when you apply for a mortgage or any other type of credit they look at your car loan as part of the equation ,as a negative.  If you own a house and are paying a mortgage and you look to buy a car, your house payments will affect the ratio but your house is a valuable asset. 

Here is the basics. If you buy a car before a house it will make it harder to get in to a house. If you buy a house before a car you may even be able to leverage your house to get your car. So why buy a house before a car?


Take a look here to see how you can leverage the equity in your home to get a car. If you have any questions please contact us and ask questions. We are here to help.