Cars versus homes

[jpg7n16]

I've mentioned and thought this before, but people always ask can i afford to buy this home? How much home is too much? I think a lot of people actually consider home purchases and buying at 30% or 35% isn't necessarily a bad thing depending on where you live.

30% is pushing it. 35% is too much. 28% is supposed to be the max, not the suggested.

Anything much beyond that hurts your ability to build wealth. 35% means 7+% you could have saved for retirement.

Yet pretty much everyone not on this website will tell you a car payment is a must have. That who buys cars without a payment? And what's the big deal about a $500/month car payment? That's about $100k extra in a home mortgage.

You're looking at a much different timeframe. $500/month for 30 years @ 4% is about $100k. $500/month for just 5 years @ 4% is $27,150 - more than enough to get you a great car... and done 25 years sooner.

If you qualify at 4% on a home loan, you should be able to qualify for esentially 4% on a car loan.

And $500/month doesn't buy much car. I hear of most payments between $800-1k/month. So why do people focus so much on the home versus car payments? Plus people keep getting new cars every 5 years or more. I've friends who buy every 7 years. Very few people keep cars a decade.

Really? Who have you been listening to?

I really hope you're talking about combined car expenses for a married couple... if that's an individual, they're insane.

I guess my point is that why are we so focused on the home mortgage when I think actually it's car payments that really drive debt? That people making $50k are driving $20-30k cars? It feels like people are driving a lot more expensive car, something out of their price range than people buying houses they can't afford.

Becuase it's not the car payment that drives debt, it's the housing.

Housing payments can easily be $1000-2500+. Normal people get car loans for about $275-400/month.

So if there is overspending, which is easier to cut back on: $2500 or $400?

If you're spending $2000 on housing, and should be spending $1500 - that's a $500 difference.
If you're spending $450 on a car, even if you paid off the loan completely, you only save $450.

Focus on housing, because you should focus on reducing the largest number in your budget first.



........... but then you should immediately evaluate your car situation too. It's not one or the other.

Yes, look at the house first, but look at both.

[MonkeyMama]

I pretty much equate buying *new cars* with *crazy* but I admit I live in an extreme high cost area. So basically, the average person can not afford both. You learn early on that cars are a complete waste of money. (Though I love my cars and will buy them used so I have the luxury). I admit I have to remind myself on these forums that not everyone has such expensive housing, and the newer/more expensive cars are probably a fair splurge for many. But regionally, it is usually not a fair splurge to buy a new vehicle.

When it comes to a high cost area, it becomes the difference of dirt broke/hands tied, and being able to actually put 20% down on a decent home. OF course, knowing I am saving tens of thousands every decade with our own car purchases, and once our home is paid off or our income increases, etc., I think I will probably want to do a lot of other things with that extra money rather than buy more luxurious vehicles. After years of seeing the difference it makes financially.

For most people, housing is #1, but cars will be a very close #2 on largest expenses in your lifetime. In fact, I'd guess most people spend more money on cars over their lifetime - which makes it a quick #1 if you don't give it much thought.

[Joan.of.the.Arch]

Livingalmostlarge, I think you have a good point. I don't think anyone could disagree that people need to think about how much they really are spending on their cars and how it compares to a mortgage.

In the early 2000's it seemed like there were suddenly a lot more people driving luxury cars. I figured luxury cars were being bought with home equity loan money (whoa!). In those years, I think luxury cars became so common that they no longer even seemed exceptional to many.

I used to see these cars driving down the street, think of the purchase price of my little home and think, "Wow, that would be like driving my house down the street. Same price. Same utilities almost. Some entertainment systems. Cushier furniture." Those people were spending a small mortgage-worth of money just on this one car. Then how about their next car? And the one after that?

[disneysteve]

Becuase it's not the car payment that drives debt, it's the housing.

So if there is overspending, which is easier to cut back on: $2500 or $400?

It is much quicker and easier to downsize your car habit than to change your housing. And in some HCOLA, quality safe low cost housing simply doesn't exist.

You learn early on that cars are a complete waste of money.

For most people, housing is #1, but cars will be a very close #2 on largest expenses in your lifetime. In fact, I'd guess most people spend more money on cars over their lifetime - which makes it a quick #1 if you don't give it much thought.

I totally disagree that cars are a waste of money. I consider a car to be a necessity, though it can vary based on where you live and work. In Manhattan or DC, you can get along okay without a car, but it most places, that isn't feasible.

I agree about the impact of the cars, though. Somebody buying a brand new car every 3-5 years may certainly spend more over a lifetime than they spent on housing.

In the early 2000's it seemed like there were suddenly a lot more people driving luxury cars. I figured luxury cars were being bought with home equity loan money (whoa!).

Also, leases became much more popular. Years ago, personal leases were rare. Now, they've gotten to be 30% or more of all new car purchases. People use leases to get into cars that they couldn't otherwise afford. And it also locks them into eternal payments since the vehicle is never paid off.

[MonkeyMama]

I meant to say: *new* cars are a complete waste of money. (You pay a lot for name brand, luxury and appearances).

I am pretty pro-car, in general. I just don't see why you have to spend SO MUCH for a reliable/safe vehicle.

[Frugal]

I agree that new cars are a waste of money. I would almost go so far as to say any car which requires a loan might potentially be, but I know a majority of people seem to buy cars this way. I personally have never had a car loan, and hope to never be forced to have one. I buy used, old, efficiently running cars, but the one I have now is more reliable than my spouse's newer car.

[nick__45]

nick: Wow, why have I never heard of that before. I would bet that the car dealerships hate it, but maybe people are just used to it. We have an (8) year old car and an (11) year old car. Both have been well maintained and have low mileage for their ages, so we'll be hanging on to them as long as possible.

I'm in CA and we pay an annual registration and have to pass a smog test every two years. The registration fees are based on the value of the car and so USUALLY decrease every year, however, they have gone up in the last couple of years.

We also have this b.s. thing called annual state inspection. It is not done by a state but rather a garage privately owned which also happen to do general repairs. You can bet your wallet's leather grain that they'll go out of their way to find things wrong with used cars to make you pay for unnecessary repairs. If you drive around without a passing sticker, you can get a ticket each day and those tickets run about 100+, depending on counties. Cops love giving out those tickets because most people wouldn't show up for fight it and the only way to fight it is to have a passing sticker, which would require needless repair. This is because once the vehicle failed inspection at one shop, it becomes a cash cow for any other shop you take it to. For this reason, many people in Virginia don't drive old cars unless they have a hook-up with a repair shop that would overlook things. I am sure this is only done when said vehicles have regular visit to said shop. It is a scam.

Two ways around it are to either buy a new car or vehicle over 25 years old and put an antique tag on it as well as have a few new parts in the back seat to show the cops you are test driving it for function check and routine maintenance if they pull you over for having antique tag and using highway roads in normal or after hours. They deem any hours outside of weekend afternoon is non-antique event hours; therefore, usage of antique vehicle is in violation of usage agreement. However, being able to show you have parts in the vehicle because you are checking the vehicle for problem will get you a free pass or at least be able to make him put that on his ticket note to fight the charge later.

If it wasn't for the fact that my cushy job is here (Virginia ranks #1 in the amount of richest counties it has) I wouldn't live here.

[jpg7n16]

It is much quicker and easier to downsize your car habit than to change your housing. And in some HCOLA, quality safe low cost housing simply doesn't exist.

True, the car level is an easier fix, but I still believe the housing is the largest impactor of debt. On debt level, and effect to cash flow (which could then in turn create other debt).

I'd much rather have someone be in line on housing, and out of line on cars; than out of line on housing, and in line with cars.

It's obv preferable to be in line on both, but if you had to choose just one - I'd say make it the car.

We also have this b.s. thing called annual state inspection. It is not done by a state but rather a garage privately owned which also happen to do general repairs. You can bet your wallet's leather grain that they'll go out of their way to find things wrong with used cars to make you pay for unnecessary repairs.

Wow. That's pretty conspiracy theory.

We have an annual state inspection in Texas. You can get it done at a garage or at some gas stations. If they say you need X repairs, you can drive to another place and ask them to do your inspection instead.

And keeping the pollution levels of cars in check is definitely a benefit to the state/planet.


We have annual inspections and annual registrations. It's a small price to pay for having no state/local income tax. But I think we'll manage

[nick__45]

True, the car level is an easier fix, but I still believe the housing is the largest impactor of debt. On debt level, and effect to cash flow (which could then in turn create other debt).

I'd much rather have someone be in line on housing, and out of line on cars; than out of line on housing, and in line with cars.

It's obv preferable to be in line on both, but if you had to choose just one - I'd say make it the car.


Wow. That's pretty conspiracy theory.

We have an annual state inspection in Texas. You can get it done at a garage or at some gas stations. If they say you need X repairs, you can drive to another place and ask them to do your inspection instead.

And keeping the pollution levels of cars in check is definitely a benefit to the state/planet.


We have annual inspections and annual registrations. It's a small price to pay for having no state/local income tax. But I think we'll manage

We have state and local income tax, along with personal property tax (car tax) on top of state inspection and emission (for some areas.) I know Texas state inspection and it's nothing like Virginia state inspection. You can't just drive a vehicle with a rejection sticker around as you'll get ticketed even though you actually have 15 days to correct the problem. Cops figure that most people won't show up to fight a no-point ticket so it is free money. The sad fact is that a fail/no inspection ticket will raise insurance because that tells the insurance company that you are operating an unsafe vehicle. I know all these because I just went through it with one of my 4x4s. They didn't want to pass it until I had to paid the "lick & stick" bribe. Then I used the same vehicle to drive from Virginia to Texas and it made it perfectly alright. Fortunately, it was a business trip so gas was covered and I needed a large vehicle to carry work equipments.

I can see the point of emission because the worst that can happen is a new exhaust and cat but those parts do carry life-time warranty and aren't hard to install.

[disneysteve]

We also have this b.s. thing called annual state inspection.

In PA, inspection was done by independent mechanics of your choice.

Here in NJ, there are state inspection centers or you can choose to have it privately inspected but the state centers are included in your registration so I'm not sure why anyone would go private. It usually took me no more than 15-20 minutes for inspection. Even better, the state recently eliminated most of the inspection requirements. I think now it is pretty much just an emissions inspection and you don't have to do it as often as you used to.

[Joan.of.the.Arch]

Departing from the topic of this thread--

nick_45, it is not just for the safety of you and your passengers that safety inspections are done. Safety inspections benefit other drivers as well.

For example, one of the basic checks is to make sure the headlights are properly aimed. Have you ever been approached at night on a dark rural highway by a car with one of its headlights cockeyed and blinding you? I sure have and cockeyed headlights can definitely be a safety problem. How can I keep my car in my lane when I cannot even see my lane due to being blinded by a wonky headlight?

Another example--Brakes are safety checked. Have you ever been t-boned by someone coming down a hill with no brakes? Probably not but I have. A safety inspection would have caught the problem before it got that bad. It would have saved me (the driver who did have good brakes, properly inspected), two years of suffering whiplash, unable to even ride in a car without the changes in acceleration causing pain, two years of being able to do all my usual manual work. Yet that was a fairly minor consequence to being hit by someone with failed brakes.

I truly think that state safety inspections of vehicles really is a covenant among citizens. You need not view every state mandate that costs you money as a greedy grab for your money.

[wincrasher]

I can see why alot of people think inspection is a waste of money. It's mostly an emmisions check, the rest is just a cursory look. It's just a snapshot in time anyways - so your car is in good order for 1 day a year - supposedly.

In general I'm kind of militant on the whole idea that driving should be alot more expensive and then people would care about their cars and how they drive. I think there should be severe fines for cars with rust holes, ineffective breaks, broken/inoperatve lights and mirrors, etc. How about a $1000 fine for a burned out headlight? I'm sick of people running around with their high beams on because a light is out. How about running down the interstate 70 mph+ on one of those "donut" spares?

I'd like to see some automatic way of ticketing drivers yakking on their cell phones. Why is there so much to talk about these days? Back in my day, we used to listen to the radio!

I'd love to see registrations at $1500 a year, inspections at $500 and gas at $10 a gallon.
Sounds crazy, right?

[MonkeyMama]

The more I think about it, the more I am pretty sure that most people I know spend FAR MORE on cars than housing over their lifetime. & living in California? That says a lot.

For me, it kind of goes back to exactly OP said. How the heck did we put 20%+ down on our home and get a low/manageable payment? By not buying expensive vehicles. So, the catch 22 is how do you buy a home that you can actually afford when you spend a large amount on vehicles? In a high cost area? You aren't going to have the down payment, so you take on bigger loans. Of course, we may personally be in the 1% in our zip code who will not lose their home to short sale or foreclosure. I constantly get confused looks as to how on earth we aren't deep underwater. Because "everyone else" is! The concept of a down payment is apparently completely foregin, as is not borrowing against home to buy cars. (Where did all that home equity go? Several of our friends bragged they had paid-off cars - turns out they borrowed against their home to pay off cars!)

So my perspective is skewed, but the car insanity and the house sanity are pretty one in the same where I live. Just to point out how inter-related it all really is.

In a low cost region - sure - you can probably buy a brand new Mercedes, and keep your house payment low. Win-win and more power to you! If you are a middle class Californian, a new car and a manageable house payment is pretty much impossible. The two are mutually exclusive.

ETA: I am thinking of my experience in 20s/young 30s and mostly people with kids. Those down payment savings years. My comments mean less when it comes to age. When the down payment is saved - when the house is paid off... Then you can certainly afford more car.

[maat55]

I'm amazed at how people say they can afford to make payments and pay interest, while they cannot save to pay cash and earn interest.

[nick__45]

Departing from the topic of this thread--

nick_45, it is not just for the safety of you and your passengers that safety inspections are done. Safety inspections benefit other drivers as well.

For example, one of the basic checks is to make sure the headlights are properly aimed. Have you ever been approached at night on a dark rural highway by a car with one of its headlights cockeyed and blinding you? I sure have and cockeyed headlights can definitely be a safety problem. How can I keep my car in my lane when I cannot even see my lane due to being blinded by a wonky headlight?

Another example--Brakes are safety checked. Have you ever been t-boned by someone coming down a hill with no brakes? Probably not but I have. A safety inspection would have caught the problem before it got that bad. It would have saved me (the driver who did have good brakes, properly inspected), two years of suffering whiplash, unable to even ride in a car without the changes in acceleration causing pain, two years of being able to do all my usual manual work. Yet that was a fairly minor consequence to being hit by someone with failed brakes.

I truly think that state safety inspections of vehicles really is a covenant among citizens. You need not view every state mandate that costs you money as a greedy grab for your money.

If it was important, every state would do. Maryland doesn't have it and they are right next to us. Additionally, most shops only check for things they happen to provide service for. Therefore, a tire shops would generally want you to get tires or would fail you and don't check ball joints, suspension, and the rest of the things on the list. It is a big scam that VA allow to happen to automatic repair industry has powerful lobbyists to recommend it. If you don't believe it, take your older car with about 200k miles and 20 years to Virginia and have it inspect for 5 shops. Chances are they would tell you 5 different things.