06/21/2016

Is It Best to Buy a Car or a Home?

With record low interest rates, you might be considering buying a new car or a new house, but might not know which is the best purchase to make at this time. Here are some of the pros and cons!

Buyers Market

Currently in Calgary, it is a buyers market in real estate. What does that mean for buying a home? That means that there are more homes on the market, and that someone selling a home is eager to sell. Buyers have leverage and negotiating power because of how much choice there is. In a buyers market, the homebuyer can get a lot more house for their dollar than if they were in a sellers market.

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This can be the case with cars as well. Many cars can be discounted when times are tough, and you might be able to get a great deal. However, there are added issues that should be taken into consideration.

Financing

With a new home or a new car, you need to decide whether to pay in full, or borrow the money for either through financing. If you have the money, paying for a car with cash can be appealing, but buying a car can be a mixed blessing. Financing for a car can add a significant amount to the overall cost of the car, and for an asset that depreciates over time, it might not be worth the effort.

When you buy a new home however, your home is considered an appreciating asset. For example, since 2006, the average price and worth of a home has increased by nearly 50% (Globe and Mail). Even if market conditions change, house prices are resiliant and generally stay the same. There is no guarantee, but looking at the long term prospects for homes, they will increase in value over time. That increase in value pays off in the long term.

Additionally, when applying for a loan or mortgage, it's important to consider when other debt you already have. If you have just financed a new car, and then want to buy a home, your mortgage could be denied due to the risk of you taking too much on. However, when applying for a loan after buying a home, you have more collateral and can be consider less of a risk.

Interest

As mentioned, interest rates are low for both homes and cars at this time, but which is the better investment?

Interest rates on a car can be low, but interest rates on homes at this time even lower. On the life a car, you might save a few hundred dollars in interest by buying a car now. However, if you buy a home now, over 25 years, you could save thousands upon thousands of dollars in interest. That money could go towards the furniture or upgrades for your home, or perhaps travel, or a car later on!

Stability

If you're driving an older car now with no warranty, you know how much it costs to deal with problems with your car. Buying a new car now can seem like the answer to those problems, but there is still no guarantee with a new car. The monthly insurance and car payments are much more costly for a new car, and can make your costs on average more expensive. This is more stable, but can also hurt your bottom line over time.

Compared to a car, renting is even more unpredictable. Rental units are difficult to find, expensive, and can be very unpredictable. Landlords can easily raise rent and restrict how many pets or children are in your residence. Rental units are money going to something that you don't get to see the benefit of in the long run.

By buying a home, you can create more stability for yourself. With low interest rates and 5 year terms for those rates, you can know exactly how much your mortgage payment will be for 5 years. As your earning power increases, that money can go to savings, your home, or even a new car.

Ultimately, it is up to what you feel comfortable with and what is most important to you. Whether you want a car or a home, the right decision can easily be found. Make sure to pick something that works best for you and your budget.

To find out how you can get into a new home today, visit stepperhomes.com and check out our Photo Gallery to see our home designs!

We build new single family homes in the following communities:

Final Quick Possession Homes in Copperfield: starting in the $510's

Mahogany Attached2 & 6 Marquis Cove SE starting in the $530's

Mahogany Laned5, 9, 13 & 17 Marquis Common SE starting in the $380's

Legacy Attached26 & 34 Legacy Lane SE starting in the low $500’s

Legacy Laned & Single Attached1737, 1741 & 1745 Legacy Circle SE starting in the low $400’s

Boulder Creek220 Boulder Creek Drive, Langdon, AB starting in the $520's

Heritage Hills8 Heritage Terrace, Cochrane, AB starting in the $340's

Kinniburgh205 Sandpiper Boulevard, Chestermere, AB starting in the $530's

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