Should I buy a car or apartment?

[32983]

Hi,

New here but let's not waste time. My wife and I earn R62K gross collectively in a month. Her car is old and I have spent 50k on it in 2 years and currently, it is worth around R80K. We are considering selling it and buying a Corolla Cross for R400K. We want to put down a deposit of R100k in total. We want a family-size car that still has a warranty and maintenance plan.

The other option, we keep with the shit box of a car and buy a 3-bedroom apartment but this will then only be the end of 2024 as we need to save for a decent deposit and money for all the fees. We live in Durbanville and 3 bedroom apartments are about 2m.

We have no debt and our monthly spending averages around 30k. (Rent, insurance, food, petrol, saving, investing, etc.)

What do you think, Reddit?

EDIT: Didn't buy the car, going to do pre-approval for a home loan in Feb. Hoping to get close to 1.8-2m

 

[noeljack]

@32983 I’d get the flat and save up for a cheaper car. R400k is a lot of money for a deprecating asset. A quick search on Auto Trader shows one and two year old models in the low R300s which are still under warranty. Like so: https://www.autotrader.co.za/redirect/listing/27308508

 

[32983]

@noeljack Wife likes the XS.

We were at the Toyota dealership checking out their demo cars as I knew the new cars were R440K which was out of the budget.

But the salesman said there is a December promotion for R400K brand new XS. They are just trying to get rid of the 2023 stock in preparation for the new model but the deal seems legit. No "Must go inhouse finance" or nothing. Just a good deal it seems.

 

[butler]

@32983 If you do go the car route..dont go for brand new. Finding one that’s 1-2 years old with ideally 10-30k mileage will save you quite a fair bit of money

https://www.autotrader.co.za/redirect/listing/27274372
That’s a decent option for example- specially if you can negotiate them down to around 320-330k

 

[noeljack]

@32983 If you’re going to go the car route, then nothing wrong with anything Toyota. They lose less value than most cars and last for years. The resale value is important to keep in mind for when you want to upgrade in the future. My sister bought a shiny new Haval and wanted to upgrade it recently. The car is only two years old. Let’s just say that thing held its value as well as a naughty kid holds the beer he’s drinking when he gets caught.

But if you plug the numbers in over a five year period, you’d be better off financially with the flat. So this is a head vs heart decision. And I will be the first to concur that the heart wins sometimes.

 

[32983]

@noeljack I can't believe I am saying this but I know what the right decision is but the heart wants what the heart wants and my wife also really wants the car. Check below my quick 1 min planned budget.

 

[saidagha]

@32983 You just need to calculate the real cost of the car, and compare it with other things you can get for the same price.

If you just put R400k in a savings account, that's R3700 per month that you'll get in interest. And your R400k won't be depreciating. You can use it any time you need.

I really don't think driving a new expensive car is going to feel nearly as good as the financial security you can have from just having R400k in the bank.

If you want to later buy a house, then that R400k might very well make the difference between being able to get your dream house, or having to settle for something else.

 

[airel]

@32983 Not necessarily saying it's the worst decision in the world, but it is worth considering that for most people (gearheads notwithstanding) a fancy new car purchase gives temporary happiness but people acclimate to it very quickly and it becomes 'normal'. It's a well studied phenomenon, you can read up on hedonist treadmill if you're interested.

Additionally common advice is not to spend more than 30% (at a stretch) of your annual on a car purchase (so in your case about 230K, if you aren't financing another car as well).

You do have to weigh this against your own circumstances, of course, and find a balance between present and future contentment. You could probably seriously over exhert yourself one one big purchase once in long while, but you just want to be deliberate about that one thing.

 

[wallybazoum]

@32983 To be honest, bud. You don't need to put down such a huge deposit down on a car. If you like the Corrola Cross, take a look at Suzuki. They offer models that are much cheaper and almost the exact same cause they are built in the same factory. If it's a 400k car, you'll probably be paying R7-8k a month for it. But if you collectively earn 60k, that shouldn't be too bad. Just remember, avoid balloon payments, and rather put a deposit down first. Balloons almost force you into financing another vehicle.
In terms of housing, normally, it's a great asset cause property prices are increasing (depending on which area you live).
However, if you're spending 50k to keep an 80k vehicle on the road, I'd definitely get rid of that car.

 

[msande]

@32983 Buy a cheap car first, if you use it to get to work.
A flat is a great idea but not the right choice if you need a car to get to work

 

[saidagha]

@32983 You really should not be buying a R400k car on a R65k salary. I earn double that and wouldn't spend more than R250k on a car.

 

[outlook2018]

@saidagha A guy I know is doing close to 20x that salary, but he drives a car worth less than half the price of the car OP wants. OP seems extravagant to me.

 

[zookajoe]

@outlook2018 Wow R1.3 million per month is insane. Tell your buddy it’s time for him to buy a better car. There’s no use to earning R14 milllion per year if you aren’t gonna use it.

 

[outlook2018]

@zookajoe Will do

 

[blueashsky]

@32983 My opinion on this significantly depends on the location of the property.

If you are looking at buying in the western cape, in a good area then the sooner you own the property the better. It will take roughly 5 years for the cost of renting to catch-up to the bond repayment value. So the sooner you start then sooner your bond repayment will be less than an equivalent rental.

How dependent is your income on the shitbox? Do you both work from home and can get by if the vehicle has an unrecoverable failure? Will one or both of you lose your jobs without the shitbox? If that is the case then your job security and reliable transport should be your first priority.

Neither are a small decision to make so there is a million considerations when choosing one over the other.

 

[gifford26]

@32983 I think there’s a middle ground you can reach here. A car that’s half that price and maybe more reliable can satisfy that need, and you can still buy your home. Don’t put a full deposit down into a car, you can keep some money aside and pay some lump sums into it, but it’s not worth it. Use it for your house deposit

 

[mariah_desiree]

@32983 Go low on a car and buy a property. I know you say the wife wants it..but my dude…it’s not sound financially. Just my 2cents

 

[ktkls90]

@32983 R400k is an insane amount to pay for a car when you collectively only earn R60k-odd.

 

[32983]

@ktkls90 It is far less than 20% of our income, so is it?

 

[airel]

@32983 It's way more than 20% of your income. I assume you're following a common rule of thumb, those usually consider annual income vs total car price.