Justin M asked:
Should I buy a car with a standard loan or with a home equity loan?
LAVERNE
Should I buy a car with a standard loan or with a home equity loan?
LAVERNE
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GONZALO
If you buy a car with a home equity loan, the advantage is that you can claim the interest you’ll be paying on your taxes. The disadvantage is, if you default. You can keep the car, but may lose the house.
ALVIN
Use a standard loan to buy the car. Save your home equity for other purposes.
Remember in most cases a car is a depreciating asset, and a home appreciates in value. In other words if you want to increase your net worth buy a cheap dependable car and use your home equity to improve your home or possibly buy a new home in the future.
PAUL
No, you shouldn’t. You also shouldn’t take out a loan on a car, and you definately should not buy a new car, unless you are extremely wealthy and can afford to pay cash. Cars are a depreciating asset: they go down in value like a rock. Something in the neighborhood of 20% to 30% of the value of a new car is lost in the first year, and it starts as soon as you drive the car off the car lot.
Your best bet is to save up some money and buy a cheap, dependable car. $2000 can get you a decent car, $3000 would be better. Trust me, old cars can be very dependable, and good deals are out there. You’re not going to be driving a $3000 car for the rest of your life; save more money, and pay cash to move up to a nicer car later on. But, if you NEED a car and you are really in a fix, pay cash. You’ll come out ahead in the long run.
EMILE
There is no value to borrowing money to purchase an item that is going down in value. Why pay interest on something that is losing value?
Take the time and save the money to purchase the car. Take the time and put in your monthly “car payment” into a financial calculator and calculate how much you would have if invested in a good growth stock mutual fund for 30 years. It is not worth it to borrow money on for a car when you compare to what you could have if you save the money instead.
If you want a tax advantage take the money you would have paid the bank and give it to a charity your would like to support.