Selling Point: Choosing between buying a car or renting someones home

Bode is faced with a decision on whether to buy a car or simply get an accommodation. He has been living with his parents for some time 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 and not both, or so he thought.

How often do we find ourselves in this situation; 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. Let’s explore some of them.

Which is absolutely more critical?

One of the most important things 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 an 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 costs 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 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 are 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 you will still have the opportunity to buy or pay for. For example, you may get a house in a choice neighbourhood 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 can 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 before taking that decision. If you buy a car as against renting a house, will you have the money to maintain it? 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 may all look very unnecessary considering the urge to just take a decision, but it is 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 can choose to live in a relatively cheaper neighbourhood. This all depends on the 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 neighbourhood and rather than to move to a cheaper area even if it is 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 renting a house; not buying it will constantly make you unhappy. That alone is a punishment, which you can 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 the 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.

How have you performed when faced with two mutually exclusive decisions?