House vs Car (or both?)
Discussion
I will be graduating and joining the working world in a couple of months time.
I really wanted to get on the property market as soon as possible, purely to be investing towards a tangible asset rather than renting (i.e money down the drain). I was thinking something around the £200k+ mark could be possible with the current government schemes and a bit of saving.
Problem is I also want a new car and would require a personal loan in the region of £15K to facilitate that.
I will be on circa £32K PA for reference and I am in a serious relationship (official ball and chain - probably within 2 years).
I know any outstanding debt will make a mortgage application more difficult but I was just looking for general advice, is it possible to do both? Rent, go mad with the car then calm down after a couple of years? Should I focus on getting on the property ladder first?
I really wanted to get on the property market as soon as possible, purely to be investing towards a tangible asset rather than renting (i.e money down the drain). I was thinking something around the £200k+ mark could be possible with the current government schemes and a bit of saving.
Problem is I also want a new car and would require a personal loan in the region of £15K to facilitate that.
I will be on circa £32K PA for reference and I am in a serious relationship (official ball and chain - probably within 2 years).
I know any outstanding debt will make a mortgage application more difficult but I was just looking for general advice, is it possible to do both? Rent, go mad with the car then calm down after a couple of years? Should I focus on getting on the property ladder first?
Only you can answer that, depends what you value and what you can afford. It'll be easier to finance a car with a mortgage, than to finance a mortgage with a car loan I should think, and if you buy a car you're buying a depreciating asset, whereas with a house you are hopefully buying an appreciating asset. Obviously if you need a nice car for work that might be more important, but if not then the house seems more sensible.
Condi, I was actually suggesting something used which has been stable/appreciating over the past couple of years, hence why I was thinking of getting a personal loan with lower rates and buying outright. I couldn't bring myself to buy something new. Losing 50% of your money in 3 years is a damn hard pill to swallow.
Such as what? Nothing you can, or would want, to use daily is going to be appreciating in value, especially if you are putting miles on it.
Any car you want to use for daily crap wants to be treated as a workhorse and nothing more. If that workhorse is worth 15k is up to you to decide, but plenty of people get by with a 5k Focus or similar.
Any car you want to use for daily crap wants to be treated as a workhorse and nothing more. If that workhorse is worth 15k is up to you to decide, but plenty of people get by with a 5k Focus or similar.
Buy a daily driver for £5k or so, save up and get established in the house. Save the flash cars until you can afford it, no point in starting out in life up to your eyeballs in debt on a £15k car ....
Then work on improving yourself, your skills, and earning potential. Reward yourself with a nice car later. You may even get a company car if you pick the right role, then thats the workhorse sorted. You just have to fund the toys
Then work on improving yourself, your skills, and earning potential. Reward yourself with a nice car later. You may even get a company car if you pick the right role, then thats the workhorse sorted. You just have to fund the toys
Currently have a V8 5-series, was planning on running it until I could calculate my exact commuting costs. I'll most likely swap it for a 530D if fuel is absurd but I could often squeeze 30mpg out of it on longer runs. I would also probably hang on to it initially if purchasing the new car.
Condi: TT 6-speed Supra, had the pleasure of working on/driving a couple and know what they are about; don't see much difference in running costs compared to the 5-series either. I remember they were sitting around £10k in 2010; £16-17k+ today. I doubt I could do much worse than break even in a couple of years time even if I put on 50k miles. I'm not too concerned about it depreciating slightly though, it would definitely be one I intend to keep for a long time, depreciation on a new car is a different story.
I guess the reality of possibly having to drive a true run-about for a few years is something I haven't really considered, given that I have been lucky enough to own interesting cars since I passed my test. This may be something I need to get over (you can probably tell that my sensible hat has never been on for too long).
Condi: TT 6-speed Supra, had the pleasure of working on/driving a couple and know what they are about; don't see much difference in running costs compared to the 5-series either. I remember they were sitting around £10k in 2010; £16-17k+ today. I doubt I could do much worse than break even in a couple of years time even if I put on 50k miles. I'm not too concerned about it depreciating slightly though, it would definitely be one I intend to keep for a long time, depreciation on a new car is a different story.
I guess the reality of possibly having to drive a true run-about for a few years is something I haven't really considered, given that I have been lucky enough to own interesting cars since I passed my test. This may be something I need to get over (you can probably tell that my sensible hat has never been on for too long).
The most important single piece of advice you will ever receive, and I wish I had known this myself many, many years ago, is to save 10% of your post-tax wage, EVERY month.
This will make the biggest difference to your life, far bigger than what house you live in or what car you drive. Learn to invest the money and you will become rich, even with modest earnings.
Set up an automatic standing order to take this money out of your main account on the 1st of every month. Start early and you won't notice it's gone.
Learn to live on the rest and you may be poor at the start but don't take on debt and your life will soon get much better. You'll be surprised at how much you save.
This will make the biggest difference to your life, far bigger than what house you live in or what car you drive. Learn to invest the money and you will become rich, even with modest earnings.
Set up an automatic standing order to take this money out of your main account on the 1st of every month. Start early and you won't notice it's gone.
Learn to live on the rest and you may be poor at the start but don't take on debt and your life will soon get much better. You'll be surprised at how much you save.
I would echo the point about house first, car second. I've wanted a TVR for years, but I've resisted whilst saving what I could for a house deposit- purchase is currently going through and should hopefully be sorted in the next few weeks.
The plan then later this year (or early next) is to take out a £10k personal loan which will give me around £12-£13k to spend on a Chimaera.
My reasoning, as pointed out above, is that it should be significantly easier to get a £10k personal loan when I already have mortgage, than it would be to obtain my first mortgage whilst having a £10k loan outstanding (or rather obtain a mortgage of the amount required).
I'm in a similar position financially- £34k salary, plus a small amount of additional income from a company I run, but I'm purchasing a house on my own and for a fair bit less than £200k as I am using the Shared Ownership Scheme (50%)- the only way it was possible for me in the South East!
Over the time I was saving for a deposit, the average price of the houses I was looking at were increasing by more than the £1,000/month I was initially saving- I worked out I needed to be saving around £1,200/month just to stand still!... therefore being completely debt-free was crucial to maxing out the amount I could borrow.
I did have several years of renting prior to this, and I do regret not putting more of my money aside earlier on- but the cost of renting made this impossible.
So based on my experience, if you have the means to avoid renting (or at least minimise the amount of renting you need to do)- do it! I was spending almost twice as much a month on rent whilst renting outright, as the mortgage+rent portion will be on my new shared ownership property. A couple of years saving for a house deposit might seem like an age when you badly want another car, but in reality it goes extremely quick and at least then your 'living costs' will be paying off your own mortgage rather than somebody else's.
I do also echo the comment above about saving 10% of your wage each month and minimising the amount of debt you take on- I am hugely averse to debt in general, it's just how I was brought up. However I am also of the opinion that when talking about the purchase of a car which is already starting to go up in value, there is certainly an argument for taking out a personal loan vs waiting and saving for it given the current interest rates.
In my case it would take me just over 2 years to save the £10k I would otherwise borrow. I would earn minimal interest on that, and during those 2 years it is likely the equivalent Chimaera I want (going by the last 2 years) will be £1k-£2k more expensive, meaning I either need more money or get a worse example. In contrast, if I take out a £10k personal loan repaid over 3 years it will cost me around £700 in interest. And if for any reason I need to free up money and repay the loan immediately, the car can be sold for more or less what I pay for it as depreciation is no longer a factor. Certainly an element of man-maths to all of that, but it's worth doing the sums.
But either way, get the house first regardless in my opinion. A friend of mine did similar, him & his wife purchased their first place last year and therefore managed to avoid renting altogether- he has a brand new Mustang GT due to arrive in September.
The plan then later this year (or early next) is to take out a £10k personal loan which will give me around £12-£13k to spend on a Chimaera.
My reasoning, as pointed out above, is that it should be significantly easier to get a £10k personal loan when I already have mortgage, than it would be to obtain my first mortgage whilst having a £10k loan outstanding (or rather obtain a mortgage of the amount required).
I'm in a similar position financially- £34k salary, plus a small amount of additional income from a company I run, but I'm purchasing a house on my own and for a fair bit less than £200k as I am using the Shared Ownership Scheme (50%)- the only way it was possible for me in the South East!
Over the time I was saving for a deposit, the average price of the houses I was looking at were increasing by more than the £1,000/month I was initially saving- I worked out I needed to be saving around £1,200/month just to stand still!... therefore being completely debt-free was crucial to maxing out the amount I could borrow.
I did have several years of renting prior to this, and I do regret not putting more of my money aside earlier on- but the cost of renting made this impossible.
So based on my experience, if you have the means to avoid renting (or at least minimise the amount of renting you need to do)- do it! I was spending almost twice as much a month on rent whilst renting outright, as the mortgage+rent portion will be on my new shared ownership property. A couple of years saving for a house deposit might seem like an age when you badly want another car, but in reality it goes extremely quick and at least then your 'living costs' will be paying off your own mortgage rather than somebody else's.
I do also echo the comment above about saving 10% of your wage each month and minimising the amount of debt you take on- I am hugely averse to debt in general, it's just how I was brought up. However I am also of the opinion that when talking about the purchase of a car which is already starting to go up in value, there is certainly an argument for taking out a personal loan vs waiting and saving for it given the current interest rates.
In my case it would take me just over 2 years to save the £10k I would otherwise borrow. I would earn minimal interest on that, and during those 2 years it is likely the equivalent Chimaera I want (going by the last 2 years) will be £1k-£2k more expensive, meaning I either need more money or get a worse example. In contrast, if I take out a £10k personal loan repaid over 3 years it will cost me around £700 in interest. And if for any reason I need to free up money and repay the loan immediately, the car can be sold for more or less what I pay for it as depreciation is no longer a factor. Certainly an element of man-maths to all of that, but it's worth doing the sums.
But either way, get the house first regardless in my opinion. A friend of mine did similar, him & his wife purchased their first place last year and therefore managed to avoid renting altogether- he has a brand new Mustang GT due to arrive in September.
Edited by Squirrelofwoe on Friday 13th May 11:14
I may have made it sound like I'm completely against someone taking on debt to pay for a car. I'm not.
I just think the single-most important thing is to first save at least 10% of your post-tax salary.
Then after you've set aside a budget for paying mortgage, house, etc. if you can afford to spend a certain amount on repaying a car loan, PCP payments, lease payments etc., this is perfectly fine, and it's important to live life as you go along too, so don't deny yourself too much! :-)
I just think the single-most important thing is to first save at least 10% of your post-tax salary.
Then after you've set aside a budget for paying mortgage, house, etc. if you can afford to spend a certain amount on repaying a car loan, PCP payments, lease payments etc., this is perfectly fine, and it's important to live life as you go along too, so don't deny yourself too much! :-)
russ_a said:
Many years ago I bought an Elise instead of a house. In fact the Elise was cost more new than the house I was renting was to buy.
Not sure how much this has cost me over the years but it's 6 figures!
My "Elise fund" went on a house, to plug the gap between what I bought my old flat for and what I sold if for. Very annoying.Not sure how much this has cost me over the years but it's 6 figures!
Squirrelofwoe said:
I would echo the point about house first, car second. I've wanted a TVR for years, but I've resisted whilst saving what I could for a house deposit- purchase is currently going through and should hopefully be sorted in the next few weeks.
+1Similar situation here also. I've had to put off my E39 M5 purchase on account of trying to buy a house. Frustrating in the extreme but I'm sure ultimately it's the correct decision.
A 540i isn't too shabby.
Stick with it for the time being.Good luck with it all.
Thanks for the advice everyone, genuinely insightful. We all learn from mistakes and life experience is invaluable, hence why I love asking questions like this on the forum. So keep your words of wisdom coming, I appreciate it all.
I guess I need to get a foot on the property ladder, as much as it pains me to delay a car purchase. I don't plan on keeping my first property for too long though, it's purely so I am not renting and gaining equity.
Squirrelofwoe - Congrats buddy, that's one life milestone down - all the best with it. Chimaera is a special car indeed, I'm sure it will look better sitting outside a house you own.
g3org3y - Thanks my friend, good luck to you too - you'll be a happy man when you get those house keys. The vanoss issues and certain running costs frightened me a bit with the M5, I hope you'll have a decent sized emergency fund
. I see them being worth a pretty penny in a few year though.
I guess I need to get a foot on the property ladder, as much as it pains me to delay a car purchase. I don't plan on keeping my first property for too long though, it's purely so I am not renting and gaining equity.
Squirrelofwoe - Congrats buddy, that's one life milestone down - all the best with it. Chimaera is a special car indeed, I'm sure it will look better sitting outside a house you own
.g3org3y - Thanks my friend, good luck to you too - you'll be a happy man when you get those house keys. The vanoss issues and certain running costs frightened me a bit with the M5, I hope you'll have a decent sized emergency fund
. I see them being worth a pretty penny in a few year though.Edited by 540 on Saturday 14th May 17:55
540 said:
Squirrelofwoe - Congrats buddy, that's one life milestone down - all the best with it. Chimaera is a special car indeed, I'm sure it will look better sitting outside a house you own .
Cheers .
It's been hard work but I always remember being told to treat life just like seasons- you'll have seasons where you work your arse off, followed by seasons where you reap the benefits of that hard work, followed by planning for the next thing, followed by working your arse off again etc etc, and the cycle continues. I am most definitely looking forward to reaping the rewards of the last couple of years- in this case my own house and a TVR on the drive!
Definitely keep in mind the point about renting- if you have the means to avoid it then I would highly recommend doing so. If I'd have paid more attention to this when I was younger (rather than being in such a hurry to get my independence) I would have achieved all of this by my mid twenties- as it is I'll be 32 this year, but better late than never.
In fairness I did have a heck of a laugh living with mates during that time and had all kinds of crazy experiences (some good, some not so good!) that I might have otherwise missed out on- and I've ended up with some lifelong friends and a bigger social circle than I know what to do with these days, but I still get that nagging feeling that I set myself back 5 or so years by moving out early into rented accommodation. I've no doubt that will go though once I've got my hands on the house keys and me & my mates are back to enjoying awesome BBQs in the garden!
Best of luck whichever route you go down
Buy the house first.
I was on ~£32k when I was 21 and bought a car. Done all the silly holidays and just about saving a house deposit now a few years later.
I wish i'd bought the house, probably would have appreciated £20-30k in the time since and had a nice car to go with.
My brother is 18 on similar money now and my advice to him was enjoy some of the money but get alot of it saved up and assess what he wants to do in 12 months, wholst also having £5000 or so sat in a saving account.
I was on ~£32k when I was 21 and bought a car. Done all the silly holidays and just about saving a house deposit now a few years later.
I wish i'd bought the house, probably would have appreciated £20-30k in the time since and had a nice car to go with.
My brother is 18 on similar money now and my advice to him was enjoy some of the money but get alot of it saved up and assess what he wants to do in 12 months, wholst also having £5000 or so sat in a saving account.
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