Personal Finance

House or car? New or used car?

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  • May 3rd, 2015 1:11 pm
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Member
Dec 23, 2009
402 posts
46 upvotes

House or car? New or used car?

My question is two fold. A bit of background to start things off:

Income before tax: 45-50k/year -- expected to increase when I get my CMA in 4 months
Location: Atlantic Canada
Savings now: 33k combined -- 23k in RRSP and 10k in TFSA
Debt: 3k on LOC -- advance on next year's tax refund
Amount I can save each month: $1k/month if I half-tried
Possibly relocating within Atlantic Canada this summer/fall

I currently drive a 10+ year old car and it is coming towards the end of the road for it. My goal initially is to buy a house this summer @ 20% down. Based on my calculations and income, my max for a house is $175-$180k which will get something decent starting out where I am now. My first question is, based on my current situation should I buy a used car or a house first? Obviously I wouldn't go new car then house because it would seriously hamper my ability to get a mortgage for that amount with that debt load. Keep in mind I only have access to $10k if I had to get a car tomorrow.

Assuming I were to buy a house first, would I get a brand new car or a used car? New cars I'm looking at a Civic, Corolla, Mazda 3, Mazda CX 5, or Mitsubishi RVR. If I were to get new I'd keep it for 4 years.

Thanks.
33 replies
Deal Addict
Dec 18, 2006
1773 posts
267 upvotes
Edmonton, AB
Just focusing on the car part: buy used.
You can get a 2-year old car for about 20% off retail, if not more.
There usually isn't a reason to buy a new car unless you have no other debt or its a business write-off.
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Newbie
Apr 20, 2015
17 posts
5 upvotes
Mississauga, ON
keano wrote: My question is two fold. A bit of background to start things off:

Income before tax: 45-50k/year -- expected to increase when I get my CMA in 4 months
Location: Atlantic Canada
Savings now: 33k combined -- 23k in RRSP and 10k in TFSA
Debt: 3k on LOC -- advance on next year's tax refund
Amount I can save each month: $1k/month if I half-tried
Possibly relocating within Atlantic Canada this summer/fall

I currently drive a 10+ year old car and it is coming towards the end of the road for it. My goal initially is to buy a house this summer @ 20% down. Based on my calculations and income, my max for a house is $175-$180k which will get something decent starting out where I am now. My first question is, based on my current situation should I buy a used car or a house first? Obviously I wouldn't go new car then house because it would seriously hamper my ability to get a mortgage for that amount with that debt load. Keep in mind I only have access to $10k if I had to get a car tomorrow.

Assuming I were to buy a house first, would I get a brand new car or a used car? New cars I'm looking at a Civic, Corolla, Mazda 3, Mazda CX 5, or Mitsubishi RVR. If I were to get new I'd keep it for 4 years.

Thanks.
If your only going to keep a new car for 4 years why don't you just lease it? Payments will be no more then 200-250 on a Civic... Its cheaper in the short run.
Deal Fanatic
User avatar
Jan 17, 2002
7777 posts
948 upvotes
Toronto
As mentioned, buying a new car and only keeping it 4 years isn't the wisest choice.. Also why are you looking to buy a house this summer if you are possibly relocating?
Deal Addict
Aug 31, 2014
1505 posts
564 upvotes
YVR, BC
move to Vancouver where with those numbers, you will be homeless.
Deal Addict
Feb 25, 2015
1076 posts
1290 upvotes
NB
Buying a house is easy in Atlantic Canada. Selling it if/when you decide to move is another story: there are no YYZ/YVR-style bidding wars. Unless the vendor offers a deep discount, houses may sit on the market for years.

Re: cars - look at the total cost of ownership over the expected term (depreciation, insurance, maintenance, loan interest, etc). There are cases where a new car has TCO per km not significantly higher than a 2-3 years old one.
Jr. Member
Oct 13, 2013
177 posts
34 upvotes
Richmond Hill
Don't ever buy a new car, only lease and consider it as a monthly expense. As in, do I really need to spend 300 + gas + insurance for the amount of hours I drive, or the saved time versus public transportation?
Deal Addict
Mar 8, 2013
2950 posts
1611 upvotes
carbide wrote: Buying a house is easy in Atlantic Canada. Selling it if/when you decide to move is another story: there are no YYZ/YVR-style bidding wars. Unless the vendor offers a deep discount, houses may sit on the market for years.

Re: cars - look at the total cost of ownership over the expected term (depreciation, insurance, maintenance, loan interest, etc). There are cases where a new car has TCO per km not significantly higher than a 2-3 years old one.
Agreed. My advice is, don't buy a house if you may be relocated shortly.
Sr. Member
Sep 25, 2006
598 posts
58 upvotes
Ottawa
Your car is only 10years old. What does it need?
Deal Addict
Mar 22, 2010
4133 posts
2172 upvotes
Quanger wrote: Your car is only 10years old. What does it need?
I would give another +5 years after fixing it up. Go to a shop that you are familiar with and get the repair estimate. House appreciates whereas car depreciates once it takes off the lot. Even if you relocate, you can always rent out your place and recoup the monthly cost until you sell it.
Deal Guru
User avatar
Feb 2, 2014
11233 posts
3351 upvotes
Toronto
House then car....finance both. The car loan will hinder the mortgage amount, so get the house (mortgage first) and then the car (car loan). Car loans are open, so you can pay them off whenever.

keano wrote: My question is two fold. A bit of background to start things off:

Income before tax: 45-50k/year -- expected to increase when I get my CMA in 4 months
Location: Atlantic Canada
Savings now: 33k combined -- 23k in RRSP and 10k in TFSA
Debt: 3k on LOC -- advance on next year's tax refund
Amount I can save each month: $1k/month if I half-tried
Possibly relocating within Atlantic Canada this summer/fall

I currently drive a 10+ year old car and it is coming towards the end of the road for it. My goal initially is to buy a house this summer @ 20% down. Based on my calculations and income, my max for a house is $175-$180k which will get something decent starting out where I am now. My first question is, based on my current situation should I buy a used car or a house first? Obviously I wouldn't go new car then house because it would seriously hamper my ability to get a mortgage for that amount with that debt load. Keep in mind I only have access to $10k if I had to get a car tomorrow.

Assuming I were to buy a house first, would I get a brand new car or a used car? New cars I'm looking at a Civic, Corolla, Mazda 3, Mazda CX 5, or Mitsubishi RVR. If I were to get new I'd keep it for 4 years.

Thanks.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Feb 25, 2015
1076 posts
1290 upvotes
NB
CdnRealEstateGuy wrote: House then car....finance both. The car loan will hinder the mortgage amount, so get the house (mortgage first) and then the car (car loan). Car loans are open, so you can pay them off whenever.
^ What he said

1. get the maximum mortgage you can, with 5% down
2. buy a new car with 0 down and 84-month term.
3. get nominated for Darwin award.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
carbide wrote: ^ What he said

1. get the maximum mortgage you can, with 5% down
2. buy a new car with 0 down and 84-month term.
3. get nominated for Darwin award.
This made me LOL :lol:
Deal Fanatic
Nov 9, 2013
5885 posts
7465 upvotes
Edmonton, AB
carbide wrote: ^ What he said

1. get the maximum mortgage you can, with 5% down
2. buy a new car with 0 down and 84-month term.
3. get nominated for Darwin award.
It's funny because many people would read this and nod their head and go "yup makes sense".

Do you REALLY need a newer car? Cars have a terrible effect on personal finances - not only do they have massive up front costs but then they suck you dry with maintenance costs, gas, insurance and depreciation. Buy a used car. Don't finance it, pay upfront.
Member
Jan 6, 2008
295 posts
48 upvotes
Depreciating asset vs asset - hmm...what to do, what to do...
Deal Expert
User avatar
Oct 19, 2003
20241 posts
8367 upvotes
Toronto (Bloor West …
You going to live in a car?

How about buy housing somewhere where you won't need to rely on the car, then that's a win win right?
Jr. Member
Jun 17, 2011
194 posts
30 upvotes
MAPLE
kivyee wrote: Depreciating asset vs asset - hmm...what to do, what to do...
:idea:
Deal Fanatic
User avatar
Nov 2, 2013
5697 posts
1522 upvotes
Edmonton, AB
Oh with RFD logic get a 0 down 0% interest brand new vehicle and get the longest term- 84 months.

On a serious note, it sounds like you are money savvy. If you save about 1k a month, and would like to continue to do so, I would not buy a new vehicle, as the depreciation will erode a significant portion of your monthly net worth gain quick. With leasing that's just money down the drain also, up to you if you want to waste.

Now house vs car, think this is a fairly obvious answer... Unless you live in somewhere where public transit isn't available and your current vehicle isn't running anymore.
Accountant (Public Practice)
Deal Fanatic
User avatar
Nov 2, 2013
5697 posts
1522 upvotes
Edmonton, AB
604nation wrote: move to Vancouver where with those numbers, you will be homeless.
Not if he/she works at Starbucks and rides the bus. :D

You are right though, 1k? be lucky if he/she saves $50. You need a good 3k a month just to live, and that's given you have no car payment and are cheap. lol
Accountant (Public Practice)

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