I have a cousin the same age as me (late 20's). We are both spending just over 20 grand this month, me on a very modest 2 bedroom house, him on a BMW 3 series (imported from Germany via the internet).
Fair enough, his BMW will look good and turn heads and my new house won't, but in five years time my house will hopefully be worth what I paid for it and his BMW will be worth 5 grand-ish.
My point?...Buying new is insanity, I'll stick with my near 8 year old ZX worth 500 quid!!!
|
|
Ain't it the truth... But then again I bet he paid more than 20k for his house too ;)
|
|
|
I take your point on the depreciation of cars compared to houses, but if spending 20k on a car is what makes your cousin happy, then good luck to him. Foreigners think we're mad in this country paying what we do for a house, and if you compare the crippling mortages most of us saddle ourselves with here they are probably right.
And remember, no manufacturer makes used cars, so if nobody bought new, there would be no bangers to buy.
|
|
Foreigners probably think we are mad paying what we do for a car, as well !!
|
|
|
|
|
Miller, want to work out the interest you will pay on that mortgage? It might just change your view on house values.
|
a 20k mortgage over 25 years would be 30k interest, assuming a 6% interest rate over the whole period.
The house will most definitely be worth more than 50k in 25 years time.
Monthly payments will be £100. Probably less than the cost of petrol his cousin will be putting in.
Mr Mortgage.
|
A 20k mortgage over 25 years would cost £128.73/month assuming 6% interest rate and a repayment mortgage on a daily interest basis.
Total payments over the term would be £128.73*300 = £38619. Interest paid would therefore be 38619 - 20000 = 18619
This however does not give a true picture, inflation will devalue the £ as the mortgage proceeds.
You are therefore buying an appreciating asset with depreciating money.
You then need to take into account the cost of running the house eg repairs insurance council tax etc. Still a better deal than a car though
What am I doing working at this time of night. I'm off to bed. Night All
|
|
|
|
|
Ah, yes, but (a) you can live in a house, not a car, and (b) paying mortgage interest makes more sense than paying rent.
|
|
Very true, but have you tried driving a house to work?
|
|
|
|
|
Makes you think about value for money though. I reckon the average person could build their own house if push came to shove, even if you had to dig the clay and fell the trees. Try building a car from scratch. I think cars are temendous value for money, though a terrible investment.
Mike
|
|
|
You're lucky to be able to buy a house for 20K. Where I live, a modest 2 bed would be 120K+ and first time buyers find it very difficult. Still, I agree that for most people buying a house has a greater priority than a flash car and should be a good investment in the long term.
Keith
|
|
|
Could you please explain why paying rent is worse than paying interest. In one case you rent the house, in the other you rent the money. But in both cases you don't see your hard earned again, and someone else makes a fortune out of you. House prices do rise on the whole, but it's still a risk, as people who bought houses in the South East around 1989 will know, and in any case if you sell the house you still have to buy another one. If the price of your house rises, you'll find that the price of other similar houses has risen as well. In order to move "up" you have to put more capital in. Buying a new car is indeed similar to burning money, but houses are only an "investment" if you can pay cash, or you have a second one to rent out. Not many people can do that.
Chris
|
I have to come clean and say I fit the description in your last para. However I used to hate being at the mercies and whims of landlords/ladies - renting, and there's the argument which has nothing to do with economics, that of personal and mental security, as well as pride. There are many other reasons for our buying choices than economic ones. (Otherwise why would I pay to store a 36 year old Mustang in UK just so I can use it once every 18 months or so? Answer, it's beautiful to look at and to listen to and I love it).
Had to get a motoring slant in there, else Martyn'd be getting toe-y.
|
|
|
|
But everyone always views a car as an "investment" when that is the last thing it is!
The way people use the word investment is more often than not used for things such as houses, old paintings, antiques etc - Often something which is likely to or is hoped to appreciate in value although I know that isn't the strictest definition.
The odd car here and there might be an investment (buy a convertible Merc and don't drive it for 20 years) but really when you spend 15 grand over 5 years on a car (20 grand - 5 grand resale) you are paying 3 grand a year for the privelidge of having the car and being able to use it. I guess it all depends on how much cash you've got spare and where you're priorities lie - Me, give me the house anyday...
|
Dan
Not everyone wants to run a car for the minimum outlay possible. Once you got a house, and the cash, why should you not spend more than the minimum on a car?
There are potential benefits to be gained by running something newer - reliability, safety, comfort for three, as a consequence of spending a greater amount of money.
It's a personal choice what you do with your spare cash.
regards
JS
|
|
|
|
|
If its a 330d though, all is forgiven. That is a truly brilliant car - almost worth the money.
|
"If its a 330d though, all is forgiven. That is a truly brilliant car - almost worth the money."
If you buy on the continent and save £5K+, they're excellent value for money. Mine (bought in Holland) is 10 months old and has yet to visit a dealer in the UK. I agree completely with John S's comments but I've already got the house with the mortgage paid off. To me, it was worth spending the money for the pleasure of driving a fabulous car which, hopefully, will give me many years of low cost and reliable motoring. But, if I was in my 20's the house would come first.
On the subject of houses as an investment, I paid just over 20K for my house 25 years ago and it is now worth at least 10 times that. The interest on my mortgage was insignificant compared to the capital gain and the repayments reduced over the years in real terms. Had I rented, the rent would have increased over the years and the landlord would have got the capital gain. And I wouldn't have the security that comes with owning a property, particularly when the mortgage is paid off.
|
|
|
|
|
You can sleep in a car, but you can't race a house........
|
|
|
Just spent £15k on a kitchen. Probably added £30k to the house. Wouldn't dream of spending £20k on a motor, unless I was already holding the folding for a punter with £21k for it.
HJ
|
|
|
