Drive Home Your Dreams: Sell Your Car, Own a Property!
When you are young, being the owner of your very own car is the ultimate dream, and it has been considered a rite of passage for many decades. But has that changed over recent years?
Having the freedom to go wherever you want, whenever you want, is one of the most important milestones of adulthood – at least to teenagers, who have spent their entire life until this point shepperded from point A to point B by loved ones.
However, data from the recent Household, Income and Labour Dynamics in Australia (HILDA) survey shows us that between 2011 and 2016, the number of young Australians getting their driver’s license at the ages of 18 and 19 has actually decreased six per cent.
A 2019 article, Millennial mindset exacerbates car sales slide, published in The Australian Financial Review, discusses this decline in car sales, attributing it to a “greater reluctance by young people to become car owners.” There could be a number of reasons behind this decline, including the cost and increasing regulation and requirements around getting licenced. Also, the uptick in ride sharing and online delivery services such as Uber and UberEats might mean that people don’t require cars as much as they used.
Another potential reason? Young people may be putting their time, energy and money towards buying property instead.
Why You Should Ditch Your Car for a House Deposit Instead
While a large number of Aussies still place huge importance on owning a car, more and more young people are also starting to realise the benefits of forgoing personal modes of transport, all in the name of home ownership.
While real estate is generally always a sound investment, buying a car might not be. It’s common knowledge that once you purchase a car and drive it away, it immediately depreciates in value. This means that car is an asset – one that declines in value every day – rather than being an investment.
The catch here is that the longer you have your car, the less it’s worth. This is due to that depreciation we mentioned, which is the result of regular wear and tear, as mileage racks up, and as more services and fixes are required.
Another little-known fact is that your car loan repayments are doing you no favours with the bank either. While it can be helpful to your credit rating to be paying off a car (provided you are making your repayments on time), the more financial obligations you have each week, the less money a bank or lender is going to be willing to lend you.
For instance, it is estimated that every $5,000 in personal debt you have, reduces your borrowing power by up to $20,000. Having a $20,000 car loan could mean a bank is willing to lend you $80,000 less than it would if you didn’t have a car.
If you are trying to pay off a car loan while simultaneously trying to put money aside to buy a home or an investment property, you might find yourself saving for quite some time. As anyone who owns or has owned a car before knows, you tend to constantly have one hand in your pocket. Car servicing, registration, petrol and general upkeep can all be quite costly.
If you have read this and you are thinking with regret about the car parked in your garage or driveway, don’t despair. Instead, consider whether you could live without it? By selling your car, you will not only enjoy a cash windfall that could be used to help you purchase a property, you will also have less financial obligations every week in terms of repayments, petrol and servicing.
Frequently Asked Questions
What is the main focus of the article?
The article discusses the trend among young Australians to prioritize buying property over owning a car. It explores the financial implications of owning a car, such as depreciation and loan repayments, and how these can affect one's ability to buy a home.
Why are fewer young Australians getting their driver's license?
According to the Household, Income and Labour Dynamics in Australia (HILDA) survey, the number of young Australians getting their driver's license at the ages of 18 and 19 has decreased by six percent between 2011 and 2016.
How does owning a car affect your ability to buy a property?
Owning a car can reduce your borrowing power when applying for a home loan. For example, every $5,000 in personal debt could reduce your borrowing power by up to $20,000.
What are the financial downsides of owning a car?
Cars depreciate in value over time and require regular maintenance, which can be costly. Additionally, car loan repayments can affect your credit rating and reduce the amount a bank is willing to lend you for a home.
What are the benefits of selling your car when considering property ownership?
Selling your car can provide a cash windfall that can be used as a down payment for a property. It also reduces your weekly financial obligations, making it easier to save for a home.
Are there any alternatives to owning a car that the article suggests?
The article mentions the rise in ride-sharing and online delivery services like Uber and UberEats as alternatives to owning a car, especially for younger people.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.