Making better money decisions is crucial when buying your first car or home

Buying your first car or home is a thrilling milestone on your journey as a young professional. It's a significant step towards independence and establishing your financial future. However, it's also a decision fraught with potential pitfalls that could have long-lasting financial implications.

‘Many young people try to navigate this process without fully understanding the risks or educating themselves on every aspect of the commitment they are entering into,’ says Tracy Afonso, Executive of Private Clients and Small Business Services at Nedbank. ‘But whether you’re a first-time buyer of a car, a home, or both, its vital to empower yourself with the knowledge you need to make informed decisions.’

Dumisani Zwane, Executive at MFC, a division of Nedbank, agrees. He emphasises that when it comes to making good decisions regarding arguably the biggest moveable and immoveable assets you will buy during your life, the best investment you can make is equipping yourself with as much knowledge as you can. To help, Afonso and Zwane highlight 5 potential pitfalls common to home and car buying that young professionals need to avoid:

  • Not doing your research – When buying a car or a house, conducting thorough research is crucial to avoid costly mistakes. For cars, this involves understanding different makes and models to determine which best meets your needs in terms of reliability, safety, and fuel efficiency. Similarly, when buying a house, you should understand the market trends in your desired area, research neighbourhoods, and evaluate the property's condition and history of renovations. ‘Both these purchase processes require careful consideration to ensure that they align with your current financial situation and your long-term lifestyle goals,’ Afonso explains.
  • Rushing the process – Whether it's a test drive for a car or a detailed home inspection, rushing through the evaluation process can mean overlooking potentially costly issues in the long run. Take a car for a thorough test drive to check for any mechanical issues or discomfort, and spend time inspecting a house, assessing everything from the foundation to the condition of the roof and plumbing. ‘Hiring a professional mechanic or inspector to check for issues is crucial,’ Zwane says, ‘as they will be able to uncover hidden problems that could significantly impact your finances or safety.
  • Letting emotions override practicality – Viewing a car or a house can evoke strong emotional responses. However, making decisions based primarily on emotions can lead to purchases that don't align well with your current and future needs. ‘You might fall in love with a sleek, sporty car or a charming old home,’ Zwane says, ‘only to find that the car doesn’t have the safety features or fuel efficiency you need, or the house requires expensive repairs that you haven’t budgeted for.’ He recommends making a list of your needs and priorities before you start shopping and assessing factors like your daily routine, family size, future plans, and budget.
  • Underestimating the total costs – Often, first-time buyers consider only the price tag of a car or the listed price of a house and forget about the additional costs like maintenance, insurance, taxes, utilities, and other fees that can significantly affect their budget. ‘Remember that the true cost of a car or home extends far beyond the initial purchase price,’ Zwane cautions, ‘and planning for these ongoing expenses is key to long-term financial stability.
  • Failing to get professional advice – While family and friends mean well, their advice is usually based on their own experiences and biases. “It’s in your best interest to consult with a professional financial adviser, like a Nedbank private banker, who can offer expert, unbiased guidance based on current market conditions and your unique financial circumstances,” Afonso says. ‘Working with a professional ensures that you're getting the best possible terms on your financing and making a smart, informed decision about your first major purchase.’

‘At Nedbank Private Clients, we understand that the excitement of your first major purchase can cloud your judgment,’ Afonso says. ‘So, our private bankers are committed to providing personalised advice and support to help young professionals navigate the process with confidence and make a purchase that aligns with their financial goals and lifestyle needs.’