Have you seen some of the crazy car payments people have today? These days people are buying cars that are way out of their price range. If it isn’t bad enough that people buy overly expensive cars, then consider this. People no longer finance cars for only 3 years, but instead finance cars for 5, 6 or even 7 years. Take this car loan and payment, for example:
- $30,000 car loan
- Payable over 5 years!
- 2.9% interest rate
- $537.73 payment per month
A huge part of America wouldn’t even blink at a car payment this big. They’d accept it as a part of life and move on. The thing is, they have no clue what they’re missing.
Believe it or not, you can get a mortgage and own a house for less than the payment on this car. How do I know? I’ve done it. You could have a house for a similar monthly payment and at the end of the loan you’d actually own something worth more than when you bought it! Of course, your loan will last longer than 5 years, but the monthly payment will be the same or less!
What You Get When You Buy A Car
When you buy a car, you’re buying transportation that will take you from point A to point B. Your car has a distinct purpose and can save you a ton of time over other transportation options. However, cars have a pretty defined useful life and as you use your car, its value will decline slowly until the car falls apart and is worthless. Cars depreciate over time and in the end you sell the car for much less than you pay for it.
Instead You Could Get A House
A few years ago, I wouldn’t have thought it was possible to buy a house for less than a car payment, but I was wrong and I actually did it myself! Here’s an example that actually cost more than my house did:
- House Sales Price: $100,000
- Down Payment: $20,000
- Loan Term: 30 years
- Interest Rate: 4.50%
- Payment (before insurance and taxes): $405.35
That’s over $130 less per month than the car payment above! Crazy! Now, keep in mind you will have to pay insurance and taxes. You’ll have to maintain your home. However, in the end you’ll own a house and the home will be worth a ton more than that car that would be 30 years old.
Before you start complaining that buying a $100,000 home is impossible, let me point out that it is possible and the only thing stopping you is yourself and your choices. The house probably won’t be huge and it definitely won’t be in a major metro area. It can in fact be a very nice house, it just might be in a different part of the country.
Considering that housing is normally one of the most expensive parts of a person’s budget, if you move to a cheaper area of the country to buy a cheaper home you can probably take a pay cut and still end up financially ahead. It is possible to have a house payment that’s less than a car payment and I’ve done it!
Have you ever had a house payment that is smaller than a typical car payment? Were you shocked that it is possible?
Picture by: 401(k) 2013 Text added by: Lance Cothern
I’m currently in the process of buying a house and although my mortgage payment is a little higher than $400 per month I love how you laid the benefits of buying a house out. Its crazy to think that some people throw all that money away just to buy a car!