By Property Hunter
clock 24-05-2021
hit 1,551
House or Car? Which Would You Choose?

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So, you've earned a decent paycheck in the last 6 months and now the question is: what big purchase should you make? Many people have their theories about what you should or shouldn't do, but let's look at the bare facts.


























































































 





A Car





A Condo





Base Price





RM50,000





RM500,000





Downpayment





RM5,000





RM50,000





Monthly instalment





RM565





RM2,060





Interest rate





4% fixed (estimate rate for new car)





4.25% reducing balance





Loan tenure





9 years (max)





35 years (max)





Other costs





RM300pcm (petrol), RM350 (maintenance + road tax), RM700 (car insurance)





RM300pcm (utilities), RM250pcm (maintenance fee), RM25pcm (sinking fund)





Asset





Will Depreciate





Will Appreciate





Figures in the table above are only a minimum estimated value of a new vehicle and home.



The table isn’t exhaustive, but it gives you an idea of what to expect when you buy either one. Buying a car requires a smaller downpayment and its shorter tenure makes it a less scary commitment. The downside is that it’s an asset that depreciates in value. A house, on the other hand, appreciates in value. In most cases also, you'll never have to buy another one (unless you want to upgrade!). The downside, however, is the high initial cost and long repayment period, which leads people to take out almost lifetime loans that must be paid regardless of economic changes or instability.



So, which would you choose? There are many schools of thought and opinion on the subject. Some say to put the dream of having a cool ride on hold and save up for a home. They're not wrong about that. Buying a car first may put you in a difficult position to get a housing loan later. Whereas, buying a house first would mean getting passive income every month through property rentals and it can be used as a downpayment for a car while supporting part of the housing loan.



Ultimately, the best thing you can do in making this decision is to do what is best for you and your budget in order for you to reach financial freedom faster.



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