Should I Buy a Car or a House First?

If you’re tossing up between buying a new set of wheels or getting the keys to a home of your own, we’re here to help. Read on for an unbiased guide designed to help you answer the question, “should I buy a car or a house first?”

Your personal circumstances

Your personal circumstances are one of the most important things to consider when thinking about whether you should buy a car or a house first. The car vs house debate isn’t black and white, which means it’s important to factor in your unique situation when deciding.

For example, if you live in a major city like London with world-class public transport links and sky-high property prices, saving for a house deposit could be a smarter choice than putting your cash towards a new car. That said, many Londoners do choose to own a car and enjoy the benefits.

On the other hand, if you live in a smaller city, town or village where owning a car would have an enormous benefit on your day-to-day life and homeownership isn’t a huge challenge, purchasing a vehicle could be a better option.  

Budgeting for extra expenses

Homes and cars are both exciting purchases. However, it’s important to pencil in extra expenses for both assets. Below, we’ve put together a list of some of the biggest expenses coming your way when purchasing a car or property. While they’re not exactly “hidden”, they can add up quickly and factoring them in should be an important part of your decision-making process.   

The “hidden” costs of car ownership

• Car insurance

Car insurance can be a big expense, especially for new and young drivers with minimal experience. It’s not unusual for average annual premiums for new drivers aged under 24 to top £1,000. Many motorists buying new cars choose to add GAP insurance, which offers extra peace of mind but increases the cost significantly.

• Vehicle tax

Vehicle tax, or ‘road tax’ as it’s often referred to, is another big one. Costs average around £140 a year, though this can vary between vehicles.

• Fuel

With analysts predicting forecourt prices to hit an all-time high over the coming months, fuel should definitely feature in your car ownership budget. Of course, your fuel expenses will depend on how often you use your car.

• Parking

The cost of parking varies dramatically across the UK, with some cities offering free parking and others hitting you with huge fees. It’s worth doing your research before making a commitment.

• Depreciation

Depreciation will vary depending on the make, model, and age of the car you purchase. New cars tend to lose around 20% of their value in the first year of ownership, while second-hand models depreciate at a slower and less sharp rate.

• Servicing and maintenance

Depending on what car you buy, servicing and maintenance can be a big expense or a non-issue. Many new cars not only come with warranties but also free servicing for the first few years of ownership. In contrast, if you buy a second-hand vehicle, it’s worth factoring servicing and maintenance into your budget.

The “hidden” costs of homeownership

• Insurance

Most homeowners choose to take out insurance, with the average policy costing £142 per quarter.

• Property taxes

Property taxes can push up the price of home ownership, with rates calculated based on the value of the property.

• General maintenance and upkeep

As a homeowner, it’s your responsibility to carry out general maintenance and upkeep on your property. Many financial advisors recommend allocating around 1-2% of the value of your mortgage to cover everything from big structural jobs to small cosmetic changes.  

• Interest rates on your mortgage

Interest rates can have a big impact on the total cost of your mortgage and naturally, it’s important to shop around for the best deal.

Boosting your credit score

For many Brits, a lacklustre credit score is one of the biggest barriers to homeownership. Banks can be ruthless when it comes to checking your financial history and even small hiccups like a missed credit card payment or late phone bill instalment can affect your score.

This is where buying a car first and a home second can be a smart option. If you’re wondering does car finance help credit score, the answer is often yes. Taking out a car loan and committing to regular monthly payments can be a great way to build your credit score and prove to banks that you’re a responsible mortgage applicant.

Most home loans are significantly larger than the average car loan, which means lenders are even more strict when it comes to vetting applicants. A credit agreement with a car finance lender can help position you as a responsible borrower, so long as you pay your instalments on time.

There’s no need to worry about whether applying for car finance will affect your credit score, with the best brokers preceding formal applications with a ‘soft search’ credit check. This is a great way to check your eligibility and assess your options before actually applying for a loan that will leave a permanent signature on your credit score.

The final word on car vs house

Ultimately, the answer to “should I buy a car or a house first” depends on your own personal circumstances. You’ll need to consider your current financial situation, as well as factors like your lifestyle and personal preferences. Exploring a variety of different factors will help you decide whether vehicle ownership makes sense for you and if it’s a smart financial decision.

If you’re leaning towards a car finance broker over a mortgage broker, My Car Credit is here to help. With a large panel of lenders at our fingertips, we’re best placed to find a great deal for all kinds of drivers. Start by calculating car finance and then apply online, with no obligation and without impacting your credit score.