House construction too expensive - Stop building?

2022-08-04 09:03:27

It's always the same. People buy their used car for 20k used in cash/bank transfer, or for 30k new. The money disappears from the account, then the car is driven for 12 years, is maybe still worth 10-20% of the purchase price. You don’t have any “ongoing” costs for financing. Depreciation doesn’t come directly off the account, so it’s not there ;)

However, from the account (without considering inflation/interest/alternative investments) in 12 years for

the used car: 20,000 euros purchase price minus 4,000 euros residual value = 16,000 euros depreciation, makes 111 euros per month every month, every year for 12 years! the new car: 30,000 euros purchase price minus 6,000 euros residual value = 24,000 euros depreciation, makes 166 euros every month, every year for 12 years!

What do you do in 12 years? Exactly, get rid of the car. What do you need then? Exactly, money :) So what do you do to be able to buy the car in 12 years? Exactly, “save money” every month for 12 years to buy the car. But that’s not really saving, it’s simply “depreciation projected into the future.”

So to save say 25,000 euros in 12 years (the vehicle now costs 29,000 euros (inflation, more technology etc.), I get 4,000 euros from selling the used one, so 25k still missing) for a used vehicle you need another 173 euros every month, every year for 12 years.

Do you notice something – for a good used one that should also last 12 years, you alone need about 300 euros per month just for the car (depreciation) and for the new purchase. It won’t get cheaper!

On top of that, e.g. at least (!!)

Insurance 40 euros Car tax 15 euros Maintenance & wear costs 50 euros (brakes, tires, inspection, etc.) – 600 euros a year will probably only suffice in the first years.

So you have to reckon at least 400-500 euros per month for the car, no matter how you twist and turn it. Anything else is undercoverage

But the calculation is strange now. You don’t have to count depreciation AND new purchase. The money for the car you are driving now has already been saved before. That doesn’t arise again. But I would also budget 150 € - 200 € as a monthly savings rate for a new car. And not every car costs 30,000 €, it can be cheaper too.

2022-08-04 09:09:32

And as someone already wrote, it's always a question of where you categorize something in your budget. We have a monthly savings rate and whether tomorrow I have to replace a broken washing machine, pay for a car repair, or buy a new car because I wrecked mine, I just can’t foresee that.

There is some truth to that. I can’t imagine that everyone sets aside a depreciation amount for every device or item that can break. Due to the risk of premature failure of the devices, it has to be a mixed calculation anyway. But it’s certainly not a bad idea to roughly calculate the big things like a car to see if the monthly savings rate is sufficient and isn’t being drained for vacations or luxury purchases. There are also rough guidelines for house reserves (which vary greatly, though). But in my opinion, for a 150 sqm house, you should reserve around 100 euros in the monthly savings rate.

Now, of course, we’re scaring the thread starter again :D

What I have to say again from my own experience: ever since we have the house and garden, our expenses for any frivolities like “let’s go wandering around in the city. I need to get out of the apartment” (bam, 50 euros gone for spontaneous purchases, food, and drinks) have dropped drastically. It’s also just mega fun to simply stay home on a Saturday. I hated that two years ago. I always had to go out and do something.

2022-08-04 09:10:29

Hello,
The monthly installment should fit well for you.
We have (from November when parental leave is over) a very similar household net income and the same installment. According to my calculations and our household budget book, around €1000 per month should be left over.

That sounds reassuring. I mostly feel like a low earner with the figures here...
What are your expenses like for how many people?

2022-08-04 09:12:10

The calculation is strange now. You don't have to account for depreciation AND new acquisition. The money for the car currently being driven was already saved beforehand. That doesn't occur again.

Haha ..true. I hadn't noticed that in his explanations at all. I thought he just described the topic of depreciation and savings rate very extensively :D

2022-08-04 09:13:38

That sounds reassuring. I feel more like a low earner compared to most of the information here...

Mostly high earners hang out here as well. And not the average home builders;)

2022-08-04 09:16:06

That sounds reassuring. I feel more like a low earner with most of the information here... How much do your expenses amount to with how many people?

You earn an average income. Which is absolutely OK and sufficient for a home loan in your situation.

Your luck is the background from the family with existing land and rental income. And probably an inheritance later. Without all that, the numbers and forecasts would look different. So everything is fine with you :)

House construction too expensive - Stop building?

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