6 Money Mistakes Gen Z Is Making by Choosing Cars Over Homes in 2026
Buying a home is already hard for Gen Z. Buyers ages 18 to 24 made up just 3% of homebuyers, per the most recent National Association of Realtors Home Buyers and Sellers Generational Trends Report.
The Gen Zers who do make it into the market often spend a larger share of their income on housing than other buyers. In the 200 largest metro areas, Gen Z buyers spend an average of 37% of their income on a mortgage, compared with 26% for the average buyer.
Check Out: Gen Z Views This Boomer Spending Habit as 'Cringe' — Are They Right?
Learn More: Start Growing Your Net Worth With Smarter Tracking
So when a big car payment gets added to the picture, it can make an already tough goal even harder. Here are some money mistakes Gen Zers make when they choose a car over a home.
Putting Money Into a Depreciating Asset
Paige Wingler, vice president of consumer lending at Skyla Federal Credit Union, said one of Gen Z’s biggest mistakes is putting their money into a depreciating asset rather than saving toward a home.
“Once off the lot, the car immediately begins losing value,” she said. “Many of the newer, pricier models have loan terms of 72 to 84 months, meaning interest compounds for years. On the other hand, a home appreciates in value, making it a smart investment.”
Opting for an Expensive Image or Mood Booster
Wingler said that in the age of social media, image is everything, and some Gen Z buyers focus on what will increase their followers.
“Instead of a house, which seems out of range, young buyers opt for the quick win,” she explained. She also said that there’s a serotonin boost that occurs when purchasing an asset like a luxury car, which can push financing concerns to the wayside.
Not Understanding How To Get the Most Out of Their Money
Additionally, Wingler said that new car payments can easily exceed $1,000 per month. She explained that rather than spending this amount per month on a new car, it’s much more efficient to put it into a high-yield savings account geared toward a home purchase.
Focusing on the Payment Instead of the Price
Nick Avila, founder at United Debt Relief, said that Gen Z focuses on the monthly payment when car shopping, and dealers know it. He said that by agreeing to financing terms of 72 or 84 months to make the payment more affordable, they end up paying thousands more in interest. He added that it’s a decision that keeps them “chained” to the car and the required insurance, which he says is often very expensive for that age group.
Not Leaving Room To Save for a Down Payment on a Home
Avila said that making a substantial car payment, over even three years, can be the equivalent of a down payment on a starter home.
“But a car feels urgent, and a house feels like ‘someday,’ so the car wins and someday keeps moving further away,” he added.
Having a Debt-to-Income Ratio That’s Too High
Avila said that, according to Experian, the average new car payment is now $770 per month. He explained that when you apply for a mortgage, the lender adds up all your monthly debt and wants it to be (roughly) less 43% of your income.
“A $770 payment can eat the exact room your mortgage needed, so the new car doesn't just delay the house, it can disqualify you from it,” he said. “I've watched 25-year-olds get denied and have no idea the car was the reason.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
More From MoneyLion: