Interesting… so while contemplating on how I should finance my new car, I started to do research on the best method. Originally my 2 options were:
- Sell stock and buy the car outright
- Make a small down payment and finance the car at $400-600/mo for 60 months (at ~6.6% interest rate)
However, I’ve been looking at HELOC (home equity line of credit) and it’s looking more and more like the correct action to take. One thing that does have me a bit worried is that HELOCs are variable rate, but according to MarketWatch, the current HELOC interest rate is around 3.25% (is it me or is that exceptionally low?). I’ll need to discuss this further with my dad and Derek as they know a lot more about HELOCs than I do.
Even if the interest goes up to 7%, there’s a huge benefit in using HELOC to finance my car and that’s because the interest is tax deductible. According to BankRate.com:
When you refinance acquisition debt or take out additional debt such as a HELOC, you can deduct the interest on such debt if you use it to improve your residence and on up to an additional $100,000 that you can use for any purpose, except for the purchase of tax-exempt securities such as municipal bonds. If you use the $100,000 to buy a second home, then it gets thrown back into the $1 million pot.
Maybe when I bring this up with my dad and Derek, they’ll knock me on my head and call me stupid for thinking up such a stupid scheme. But so far, it feels like a sound plan. I wonder if I have enough money in my house yet to cover the whole purchase.