buy a car or rent an apartment

Bode is faced with a decision on whether to buy a car or simply just get an accommodation. He has been living with his parents for some time now and thinks now is the best time for him to move. He also needs a car as commuting to work every day for him has been very stressful. He doesn’t know how long he can keep jumping buses and hitching rides. His dilemma is compounded by the fact that his two most immediate needs are mutually exclusive. He only has enough money to fund either of rent or a car and not both or so he thought.

How often do we find ourselves in this situations and rather than apply common sense we let our emotions and subsequently indecision influence us to make wrong decisions. I believe there is a better way to handle this dilemma facing Bode. Let’s explore some of them.

Which is absolutely more critical?

One of the most important thing you must do is determine which one is absolutely more critical. If for example, you are squatting with friends or a relative and have been given a deadline to move out then getting accommodation is absolutely more crucial especially if you do not have an alternative. You certainly can’t live in a car for too long. Looking at things this way helps you rank needs in order of priority. It also requires that you think less of your emotional attachment to either a car or an accommodation.

Opportunity cost?

Understanding which of the two cost more if left undone is also a very good metric for easier decision-making. For example, if you decide to pay for an accommodation will it mean spending more on transportation and suffering a lot more in terms of inconvenience? Using Bode’s example above, he still stays with his parents and his reason for wanting to leave is probably because he needs his space and independence. Therefore, if it is more inconvenient for him to jump buses than it is for him to live with his parents then I’d rather he bought a car.

Which will be more difficult to get if you miss the opportunity?

There are some opportunities that are presented to us that when lost is hard to come by again. When faced with the dilemma of whether to get a house or a car, I suggest you also ask yourself which will be easier to defer and still have the opportunity to buy or pay for. For example, you might get a house in a choice neighborhood at a fairly good rent. It may even be that you just love the house. Not taking it now may mean not getting that opportunity again. It could also be that the car itself is coming at a very good price considering its market value and not buying it now may mean the opportunity is lost forever. Understanding wants and scarcity this way helps you also make the right judgment call.

Which cost less

You can’t be considering this decision without finding out the cost of taking either decision. The absolute cost and carrying cost of the two options are also very important to consider be taking that decision. If you buy a car as against renting a house, will you have the money to maintain the car? If it is a house, are you now able to pay your light bills, water bills, maintain the house, furnish it and even afford the next due rent? This might all look very unnecessary considering the urge to just take a decision but it’s important to assess the cost implication of either options.

What are the Substitutes?

Most things in life have natural substitutes. An alternative to buying a car for example may be to get a cheaper one, a lower model car or even a fairly used car. If avoiding public transportation is your ultimate goal then it hardly matters what sort of car you buy. Thinking this way broadens your mind and gives you a wide range of options to choose from. Same goes for a house too. You can decide to rent a two bedroom or three bedroom apartment. Or you choose to live in a relatively cheaper neighborhood. This all depends on if your compelling reason for looking for an accommodation. I know some people who would rather live in a one bedroom apartment just because they love the neighborhood and would rather not move to a cheaper area even if it’s a bigger apartment. Your principle will guide what is the right substitute.

Which one gives you peace of mind?

In making a decision, you also do not want to forgo buying a car (or a house) if not buying it will constantly make you unhappy. That alone is punishment which you could end up suffering till you get what you want. Imagine, not buying a car and every day you come back home late, tired, smelly and frowning. There is every likelihood that you will soon start to hate the house. Same for if you buy a car when what your heart really wants is an accommodation. This is also an important metric to consider even if it isn’t as crucial as the rest.

This article originally appeared on Nairametrics on August 8, 2014

 

3 COMMENTS

  1. This is a well written article but it has only made me more confused. lol. I think you should just go with your heart. Whatever matters more to you, thats what you should spend on. Happiness is key. But while you’re trying to decide make you can make some money in the stock market by trading online. Rgister here http://leadtraderng.com/open-an-account/

  2. I always advise you go for what you do not have rather than spend on what you have already.

    In this case, i believe buying a car is more rational since he leaves with his parents.

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