General Question

Ltryptophan's avatar

Should I keep my new car, or sell it to buy my first house?

Asked by Ltryptophan (9112 points ) January 31st, 2010

I have a new car that was upside down the day I bought it. This loan gives me an unacceptable debt to income ratio for buying a house. Now is pretty much the best time ever to buy a house. Should I get rid of the new car, get a used one, and buy a house, should I keep the new car, stay living with mom, try to pay off debt and stock pile money?

I commute one hour to work when I am not staying with my girlfriend, at least three days a week. If I buy a house it will be close to work, I could even ride my bike! I adore riding my bike as well!

Considering my car note of $430, insurance of nearly $165, gasoline, and minimum maintenance, removing these costs would certainly free up money for at least a house, but likely for savings as well. I would not want a house note for much more than that anyway.

On the other hand, I could not just get up and go whereever I want without a taxi, or a friend, etc. One alternative would be a very, very inexpensive car as a back up only (until I could afford a better car).

I would love to hear your thoughts!

Thank you!

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11 Answers

j3fr0's avatar

I’m kinda in the same boat and even tho it’s cheaper to stay at the parents, I’m saving to get a place of my own closer to work too…

TheBlackRanger's avatar

Stay at home as long as you can!!! Keep your debt down. Stockpile and when you feel good about your financial state, then you can leave.

marinelife's avatar

If you can buy a house and afford one, I would go ahead and buy taking advantage of the first time home buyer credit of $8.000. There will not be a better time.

TheBlackRanger's avatar

@marinelife are they still doing that? I thought they discontinued the program because the ran out of money

misterx's avatar

Go with the house, it is such a better investment. The house will only gain value while your car will only lose.

marinelife's avatar

@TheBlackRanger “On November 5, 2009, Congress passed a bill that included an extension and expansion of the home buyer tax credit. The bill would extend the present $8,000 tax credit for first-time home buyers through April 30, 2010. Current homeowners are eligible for a $6,500 tax credit through April 30, provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.” Source

PandoraBoxx's avatar

Sell the car because it’s a depreciable asset, live with your parents for a little while longer. The thing with buying a house is that you take on maintenance expenses (water heater goes, plumbing leak develops, refrigerator goes out, etc.) that you absolutely have to have money in the bank to handle, because you are the landlord. When you do find a place, pretty much plan on being able to save half of what your mortgage payment is in a savings account for things that come up.

TheBlackRanger's avatar

@marinelife Excellent! Thank you for that.

Ltryptophan's avatar

@pandorabox I insist on working at the place I work now. Selling the car would make living with my parents impossible.

Skaggfacemutt's avatar

A car is not a good investment, as @PandoraBoxx said. If your fancy, expensive car is stopping you from taking advantage of the great prices and interest rates on homes right now, then there would be no contest.

You can always pick up a serviceable car.

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