But some consumers have no choice but to consider buying a new car, whether they're looking for better fuel efficiency or their old jalopy finally bit the dust. Regardless of the reasons, if you're in the market for a new car, you should choose the type of financing that will keep your costs as low as possible.
Many people finance a new car purchase via either a home equity loan or an auto loan. But there are a few key numbers to consider when choosing between the two types of loan. They offer different interest rates and closing costs, and they have very different tax implications: Interest paid on your home equity loan may be tax deductible, while interest on a car loan is never deductible.The two loan types also carry different risks: Using equity in your home to purchase a car puts your home at risk if you default on your loan. If you default on an auto loan, meanwhile, you only put your car at risk.
Balancing the added risk against the potential savings from a home equity loan's lower rates (in general) and tax savings can make for some difficult math. But the number-crunching is a little easier with the help of the online loan calculator from BankingMyWay.com.
To use the calculator, you need to input the amount and term of the loan, the rates for both the home equity and auto loans and any sales tax, fees and closing costs that apply. You also have to enter your federal and state tax brackets because of the tax savings from the home equity loan.