Would You Leverage Your House To Buy A Car?

Back in the mid-90's, I remember having a conversation with a friend about how I would pay for a Subaru Outback I wanted to buy. I told my friend I was planning to take out a home equity loan to finance the car. After swigging a sip of his Fat Tire beer, my friend spit out the next sip while yelling, "What! Are you nuts?"

CNW Marketing says last year almost 800,000 vehicle purchases were financed with home equity loans (up from 625,000 back in '95). That means almost 5% of all the car sales this year were home equity loan financed. That's an all-time high.

Is that bad?

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Agent63 - 4/20/2007 7:45:55 AM

0 Boost

There's a reason why you always get deboosted. Uneccesary comments. Do you even own a car? do you own a Lexus? have you even sat in a Lexus before to feel how a Lexus feels? or is the Toyota Avalon the closest thing you've ever got to a Toyota Brand luxury car?

The LX is much improved on the interior but the exterior(REAR) is very ugly and not classy at all. It's not the classiest SUV.

AudiLexus - 4/22/2007 4:47:37 AM

+1 Boost

It definitely is not the most classiest. It is the most off-road capable though.

cdoke - 4/19/2007 1:29:51 PM

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This was something that a college in my department told me about another male in the department. They were quite close you see.

She told me that his parents did just that in order to purchase HIM a BMW 3-series. I, of course, couldn't believe it but she, nontheless, reasserted it was true.

cdoke - 4/19/2007 1:30:41 PM

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*colleague

atomicbri - 4/19/2007 1:33:43 PM

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Ok I can't see how that is really smart UNLESS, you can get a really cheap interest rate....cheaper than what the car company offers...then maybe it would be ok IF you know you can afford it.

supermoto - 4/19/2007 1:51:53 PM

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Unless you can get an auto loan with an extremely low interest rate, it makes FAR more sense to use an equity line since you can deduct the interest expense. If I used my equity line I could borrow at approximately a 3.5% interest rate, which is pretty hard to beat.

webguy - 4/19/2007 2:07:42 PM

+2 Boost

For the average person, yes, it’s text book bad; because taking money from your first home to pay for an "investment" that will most definitively loose money is catastrophically stupid. Now, if you’re a real estate guru… or you simply have 5, 6, 10,20 properties and you’re sitting on well over a million+ in equity, that’s entirely different. At some point every one comes to their own conclusion when they’ve made enough and it’s time to reap what they’ve sewn; but first home money should always be re-invested into the first home or an equally stable growth, no ifs or ands... but then again, that's just me.

EL34 - 4/19/2007 2:17:52 PM

+1 Boost

By using a 2nd home loan you will be able to write off the interest, but if you want to save on your taxes big time you will need to start a business and then you can write off everything like I do as your real estate specialist.

S4cabriofoxone - 4/19/2007 2:45:35 PM

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What's with the LX? I know it's as big as a house itself, but that doesn't justify its random placement in this article...

It is a stupid idea, IMO. I wouldn't do that only for the car of my dreams- I've made many compromises, and this has been one of them.

supermoto - 4/19/2007 8:05:34 PM

+1 Boost

Let's make this perfectly clear, if you're considering takeing out $XX,XXX car loan anyway (and can afford it), it is probably cheaper to use your equity line because the effective cost is so much lower (assuming you paid the equity loan back on the same schedule as a car loan. If I used an equity line to finance a 911 for example, I would save over $5k of interest expense over the 60-month life of the loan vs. conventional financing.

AudiLexus - 4/22/2007 4:46:30 AM

+1 Boost

I don't know who would do that, but anyone who would, especially to get a BMW, obviously does not have the best judgment.