Money Management: House or a Car?

Editor’s Note: In collaboration with Financial Literacy for Youths: Malaysia (FLY), MONGA will be releasing some of their articles on our blog. This is to promote financial literacy among millennials, in hopes to ease their way into the scary realm of personal finance and adulting. For more articles like this, feel free to hop on over to!

Money Management: House or a Car?

A recent survey carried out by KAJIDATAResearch (2017) indicated that the top 5 challenges faced by the younger generation are focused on:

  1. The national economic crisis: High cost of living / GST / Current oil prices / Basic and daily necessities (50.6%)
  2. Financial problems / Debt burden (12.5%)
  3. Social issues / Promiscuity (5.4%)
  4. Difficult to get housing / Home price increased (4 .4%)
  5. Political stability (4%)

As reflected by the above statistic, 3 out of 5 of these challenges have a direct relationship with money. This sets out to confirm the sense of urgency needed for all younger generations to educate themselves on personal finance, to ensure that financial planning is effective and right decisions are made, so everyone can go through these challenges with ease.

Today, we are going to tackle a question that is asked by many young adults:

“A House? Or a car? Which should you buy first?”

“Of course a house la! You can survive without a car but not without a house” – My Mom

Ask your parents, and without fail, the answer is always clear cut and straightforward, a “HOUSE”. Don’t believe me? Try asking!

Reasons Why House Would Be a Better First Investment

Houses Appreciate, Cars Depreciate This would be another typical answer that you can expect. Actually, house buildings do depreciate, but much more slowly than cars. A car tends to wear out in 10 years (or 15 if you’re lucky) no matter how much maintenance you do. Moreover, the cost to fix them back to “brand – new” is more than the cost of buying a new car. After some time you will find a need to buy a new car, and you can’t sell the old one for much.

The depreciated value of the car after 10 years is approximately the price you’d get if you sold it. A house however only requires a bit of maintenance (such as painting) and it will last a long time . The real difference is that the land the house is sitting on does not depreciate at all. After 100 years, the land is still just as good as new, and in most situations, it is worth MORE than what you paid for it.

So, the combination of the land preserving its value or even appreciating, and the house building also holding its value through good maintenance means that houses generally don’t lose much value over the years, and most even experience appreciation in value, unlike cars.

Upkeep Costs

Upkeep cost is defined as “the cost of maintaining in good condition”. A car has ongoing upkeep costs such as petrol, car insurance, taxes, you name it. Additionally, parking rates and toll fees have increased at a staggering rate in these few years (Chin, 2015). As years go by, it will be more and more expensive to own a car, let alone drive it.

On the other hand, house buildings do also have maintenance costs, this include electricity bills, water bills, securities, so on and so forth.

What differs them both is that, if we look at it as a whole, houses would look like a better overall investment. Yes, there are upkeep costs, but let’s not forget that houses do appreciate overtime, cars don’t. For example, you can always buy an air-condition or any household electronic that is equipped with up-to-date technology installed to save electricity, but I wouldn’t say you can do the same for a car.

But what they have in common however, is that the “ upkeep costs” of a car or house contribute to a cash flow constraints due to all savings going towards an asset, and then the costs associated with owning and maintaining that asset suck up future surpluses, making it difficult to save towards other goals.

Opportunity Cost

The opportunity cost is next best alternative foregone. With that said, the next best alternative to buying would be renting. If you rent, you will save yourself RM250,000 and a likely depreciation in house value, and you will pay rent rather than a mortgage

The opportunity cost of buying a house would be the cost of renting rather than paying a mortgage . If house prices rise, you will lose out on capital appreciation; if house prices fall, you benefit from not losing capital value.


Reasons Why a Car Would Be a Better First Investment

Accessibility and Convenience

Simple. The only reason a car would be a better first investment is that you need it to generate income. You’re living with your parents , and there is poor accessibil ity to public transport. Renting a house is always an option, but a house situated near efficient public transportation would be expensive.

Even so, the car you should invest in should be considered purely on usability and efficiency (safety, fuel consumption, maintenance costs etc), not the coolest car on the market. You are also advised to take the longest available loan (eg. 9 years) so capital constraints will be minimised and you will have more disposable income for a property.


Let’s be realistic , this isn’t an issue that would have a straightforward solution to it. Despite all the benefits of purchasing a house first, the answer is still purely dependent on the situation. For instance, you really wanted a new house, so you decide not to deal with your old car’s problem (assuming it’s the car your parents passed to you), and instead went ahead and purchase a new house. Now you have zero cash, but you do have a slowly appreciating asset, the new house you just bought. 6 months later your old car completely breaks down and the repair costs are close to the total value of the car. If the car isn’t worth the money, you will have no choice but to finance a new car. You will now be paying interest on an auto loan in addition to paying your monthly mortgage payment s. In the end is it really smarter to purchase the house first?


Chin, G. (2015). Eighteen highways see hikes in toll rates – DUKE, LDP, NPE, MEX, SMART, Sprint now costlier from Oct 15 . [online] Paul Tan’s Automotive News. Available at: – highways – get – toll – rate – hike – highest – at – rm1 – 10/ [Accessed 21 Aug. 2017].

IHS Markit (2016). Vehicles Getting Older: Average Age of Light Cars and Trucks in U.S. Rises Again in 2016 to 11.6 Years, IHS Markit Says | IHS Online Newsroom . [online] Available at: – release/automotive/vehicles – getting – older – average – age – light – cars – and – trucks – us – rises – again – 201 [Accessed 21 Aug. 2017].

JPPH (2017). Key Statistics – NAPIC . [online] Available at: – statistics [Accessed 21 Aug. 2017].

KAJIDATAResearch. (2017). Kajian Persepsi Golongan Muda Terhadap Isu – Isu Semasa. [online] Available at: – REPORT – No.1 – GENERASI – MUDA – DAN – POLITIK – JUN – 2017.pdf

Khazanah Research Institute (2016). The State of Households II. [online] Available at: – content/uploads/2016/09/KRI_State_of_Households_II_280816.pdf   


Article by FLY Writer: Do Wey Qing


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