What does new vehicles have to do with home ownership? The answer is “a lot” since the new mortgage stress test rules came into play. There were 2 recent articles which shed a light on the financial challenges coming with new vehicle ownership and your financial position.
While on the surface this article is trying to justify which vehicle brand is better to buy, the most alarming portion of the article is this graphic.
In the mortgage business when you finance a home and it is worth less than what you owe on it, this is called Negative Equity. If you finance the full value or close to the full value of a vehicle, you have negative equity for a few years. This is not a good financial position to be in as this can have an impact on your net worth position in the lenders eyes not to mention the loan payment that goes along with it.
Now this article is a real life blog about financing vehicles and the choices we make. David Chilton, author of the Wealthy Barber, provides some great insights into his car buying urges and stories in this article.
Money management is one of the most important life skills we can pass on to the next generation. So far we aren’t doing a very good job on this but that is one man’s opinion.