Smart idea? Using a HELOC to buy your next car?
| Would you take out a 30-year car loan? Okay, you’re probably thinking that sounds outrageous, so let me take it down a bit. How about a 10-year auto loan? If you’re financing the purchase of a car with the equity in your home, that is exactly what you could be doing — paying for a car over 10 or even 30 years. The use of home-equity loans, lines of credit and cash-out refinancing to purchase automobiles grew in the last decade as interest rates dropped and property values soared. |  |
It also has become popular as lenders hype the fact that interest on a home loan is tax-deductible, unlike interest on a vehicle loan. In 2006, about 24 percent of homeowners used a home equity line of credit to purchase a car or truck, according to Synergistics Research, a financial services market research company based in Chamblee, Ga. About 8 percent of homeowners took out a second mortgage specifically to buy a vehicle, says William H. McCracken, chief executive of Synergistics. But is buying a car or paying off your remaining auto loan balance with the borrowed equity from your home a good financial move?
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