Comments on: HELOC to Finance New Car? https://www.krunk4ever.com/blog/2010/03/11/heloc-to-finance-new-car/ After eliminating all other possibilities, the one remaining-no matter how unlikely-must be the truth. Thu, 11 Mar 2010 18:01:00 +0000 hourly 1 https://wordpress.org/?v=6.1.10 By: Ralph Lee https://www.krunk4ever.com/blog/2010/03/11/heloc-to-finance-new-car/comment-page-1/#comment-241267 Thu, 11 Mar 2010 18:01:00 +0000 http://www.krunk4ever.com/blog/?p=2278#comment-241267 You need to compare the cost of the HELOC to the return that you will get out of the money. In this case, you should compare the cost of the HELOC to the return that you get out of the stock, considering all possibilities. If you are okay with all of them, then go for it. Make sure to increase the value of the HELOC by the rate of your tax bracket. I’m not sure if you are supposed to use your marginal tax bracket or average tax burden (these are often wildly different numbers) but you get the idea.

]]> By: delconte https://www.krunk4ever.com/blog/2010/03/11/heloc-to-finance-new-car/comment-page-1/#comment-241258 Thu, 11 Mar 2010 16:27:26 +0000 http://www.krunk4ever.com/blog/?p=2278#comment-241258 Once you’ve decided that it’s reasonable to borrow money to finance a vehicle, which is a separate question :), using a HELOC is not a bad option. There are two things to consider though:

* Your home is now collateral. If you default, they take your home. With the auto loan, they take your car. This is Suze Orman’s argument against it.

* Difficulty getting the HELOC. Lenders are a lot tighter since the days when HELOCs were used to do 0% down home purchases. As you said, appraisal value and outstanding loans will determine the size of the HELOC you can get.

Also, if you want to hedge a bit, use a combination. For example, use a downpayment + HELOC. Consider that if you finance 100% of the vehicle cost, you’re upside down on the loan at day zero since you can’t sell it for the loan value.

]]>