Any Financial guys/gals here - question

groebuck

groebuck

New member
I want to get a second car - I'm looking in the 9K price range.

Here is what I am wondering

1. Pay Cash out right?

2. Traditional loan and invest 9K

3. Traditional loan and apply 9K to Mortgage?

4. Home Equity to buy car, invest 9K

any advice is appricated :) - Suze Orman won't take my calls (maybe I should stop screaming BABA BOOEY in the phone huh?) :lol
 
At least you are thinking in the right framework:google . First compare what rate you would get for a traditional loan (approx 5% around here). Then compare to what your money could do for you if invested in a mutual fund (safer than individual stocks). If greater than the loan, it may be beneficial to invest (keeping in mind that we are talking of a safer investment so the possibility of recouping your investment would be high).

Then compare to taking a home equity (beneficial because of the tax benefits and slightly lower rate that a traditional loan). More than likely the best way would be a home equity and invest your money.

A straight buyout with cash is always good since no interest payments are involved. However, I feel this is more beneficial when loan rates are high. One now has relatively the lowest rates that we have seen in a long time and can take advantage of them. My .02 cents.
 
groebuck said:
I want to get a second car - I'm looking in the 9K price range.

Here is what I am wondering

1. Pay Cash out right?

2. Traditional loan and invest 9K

3. Traditional loan and apply 9K to Mortgage?

4. Home Equity to buy car, invest 9K

any advice is appricated :) - Suze Orman won't take my calls (maybe I should stop screaming BABA BOOEY in the phone huh?) :lol
Click to expand...
1. My choice. It has always been my policy to pay outright for anything I can.

2. Not for me. Given todays market you will probably not only be paying interest on the loan, but will very possibly lose some of the 9K you invest.

3. Again, not for me. By the time you take your income tax deduction for your home loan, (which you can't do with the car loan), the rate is probably going to be better on the home mortgage.

4. If you have the money, I would save the interest and pay for the car. If you had to borrow the money for the car, a home equity loan has some advantages for some people.

It seems like in a roundabout way you would be borrowing the money you are investing. Tough to pay interest and still make any money on the investment. Keep in mind you will be paying both state and federal income tax on most types of investments. The return isn't that great when you give up that percentage.

Charles
 
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