A&Q about Lotus
Q:
So here is what I am trying to figure out ...
A) Do I buy an '06 elise with a few thousand miles on it for around $43K and use my home equity line at 8% to buy it, but I can write off the interest? or I could put it on a credit card with a fixed 3.99%. Assuming I will pay off the loan in 3-5 years
B) Do I buy an '05 elise with a few thousand miles on it for around $35K and use my home equity line at 8% to buy it, but I can write off the interest? or I could put it on a credit card with a fixed 3.99%. Assuming I will pay off the loan in 3-5 years
C) Do I lease an '06 Elise for $5K down and $500 a month, length of lease and buy out still to be determined? Mileage would be under the max allowed because it wouldn't be an everyday car.
I'm really leaning against a brand new car because of the amount the value the car drops the second you drive it off the lot. Look at the price of the '05's in 1 year! This would be a 2nd car and not an everyday driver. Where do I make out with the better deal?
A:
I would choose B......unless you really want the FBW throttle and L.E.D. tail lights.
John
A:
Keep in mind that to deduct the interest on your HE line, you'll have to have enough deductions to overcome the standard deduction. I'm assuming since you already have a house, you're probably at that point (i.e. probably about $8,000+ worth of mortgage interest). Thing is, you're going to get a worse rate (depending on a number of variables) with the HE line (8% x (1 - your income tax bracket)) than with many auto loans out there.
As for leases, the calculation is more complex than just $ down/$ per month, because you need to consider residuals, miles driven, etc.
A:
Originally Posted by nugg_dawg
I would choose B......unless you really want the FBW throttle and L.E.D. tail lights.
John
I'd vote B as well...
For an extra $800, the LED's can be had on '05's ...and I personally think the non-DBW throttle is better, more aftermarket support in case you decide to go that route.
A:
Get the 05. That being said you should be able to get an auto loan at better than an 8% rate.
Im bearish, but im not too fond of taking out a HELOC going into a declining home price environment either.
A:
I made an adjustment to my original post concerning another option.
My home equity is in the half million plus range so I'm not too worried about a declining market
A:
NO NO NO NO with the credit card option. There is very small convoluted fine print that states the fixed 3% rate can actually be changed by the credit card company if they believe your "credit" worthiness or situation has changed. In other words they love to prey on people who transfer large balances etc for that glamourous fixed rate and then slowly you notice the fixed rate starts to change. They do this because you appear to be a bigger "credit risk" now that you transfered a large amount. Another trick is that you read the fine print on the original offer and they state something vague like terms may change with notice.....Then you get what appears to be a junk mass mailing from the credit card company which is the "annual statement of terms". This includes super fine print on the changing the terms based on "various company defined factors". You do not have to be late to get hit with a higher rate either (but that will usually trigger it). There are major class action lawsuits right now against all of the major credit card companies because of this but for now they can legally do it.
Choose the home equity option over the cerdit card regardless of what the math may tell you.
A:
FWIW, you may not be able to put it on your credit card, as some states refuse to accept the card for more than a modest amount of money. Don't forget that the credit card is also revolving (essentially compound interest, instead of the simple interest of a regular car/consumer loan or mortgage.)
ed
A:
I also think you should be able to get an auto rate somewhere in the 6 to 7% from a credit union or even eloan.com. Depending on your tax bracket and whether you itemize your deductions the home equity will likely have lower payments because the loan will be spread over more years (which may cost you more due to interest even with the deduction).
A:
Originally Posted by Crow331
My home equity is in the half million plus range so I'm not too worried about a declining market
Shouldn't you be more worried, in that case?
A:
Originally Posted by LotusChris
NO NO NO NO with the credit card option. There is very small convoluted fine print that states the fixed 3% rate can actually be changed by the credit card company if they believe your "credit" worthiness or situation has changed. In other words they love to prey on people who transfer large balances etc for that glamourous fixed rate and then slowly you notice the fixed rate starts to change. They do this because you appear to be a bigger "credit risk" now that you transfered a large amount. Another trick is that you read the fine print on the original offer and they state something vague like terms may change with notice.....Then you get what appears to be a junk mass mailing from the credit card company which is the "annual statement of terms". This includes super fine print on the changing the terms based on "various company defined factors". You do not have to be late to get hit with a higher rate either (but that will usually trigger it). There are major class action lawsuits right now against all of the major credit card companies because of this but for now they can legally do it.
Choose the home equity option over the cerdit card regardless of what the math may tell you.
Ya know, I have never had that problem. I have credit cards with very high limits and impeccable credit and the only time I ever had them raise the limit on a "fixed" rate was when I was late on a payment. I learned that lesson and have all my credit cards setup online to deduct the minimum payment every month just in case I pay late. By the way, the card that upped my limit, I immediately transferred the balance to another credit card and closed the other account. They learned their lesson too
A:
Originally Posted by Irishfan04
Shouldn't you be more worried, in that case?
I live in the Hollywood Hills in L.A., the only way I am going to lose half a million in equity is a brush fire or California falling off into the Pacific.
A:
I agree with LotusChris, You should for sure be able to secure a lower rate than 8% through a credit union or even some of the online lenders. I went with a credit union and got 6.9% over 5 years.
And between the 05 - 06 the differences are so negligable that it is just a matter of when you want to be driving an Elise. And now that we seem to know the 07s are not that much different that is another factor. Do you want to wait for the 07 to arrive and have the dealers ditching the 06s. Or do you want to drive a car now and buy an 05. I was going to wait for the 06s to be blown out to buy an Elise. Then I saw the exact car I wanted at South Bay Lotus online but it was one of the last brand new full warranty 05s. Got a great deal on it. You actually MIGHT be able to still find a brand new 05 if you search across the country. There are some good shipping companies available or you can do the fly and drive method.
A:
Yeah so that's sort of where I am lost in the math of it all ... am I better off with an 8% that I can write off all the interest a 7% used car loan where I can't write off the interest or a 4% fixed on a credit card ....
or maybe just lease!
A:
I would use the credit card option.
In the unlikely event that they monkey with the rate, you can move the balance to another card.
A:
The HELOC loan is usually financed over 15 years. If you were in the 25% tax bracket, then the simple math would be that you would write off the portion of interest from the 8% - (25% of the 8%) = 6% net rate (again this is the very simple quick calc and I am not a banker).
The auto loan would be financed over 5 to 6 years at 7%ish. The credit card is fixed at 4% but with an open ended continuosly compounded rate. In other words if you only pay the minimum it will take you a million years to pay it off. The interest ulitmately will be huge.
Take your payments from each loan and multiply it by how long you will be paying the loan and you will see the ultimate cost of the vehicle by borrowing the money.
A:
It is my understanding the HELOC is not tax deductible interest.
A:
I would suggest using the HELOC only if you're unlike the 90% of americans who're unable to manage their debt because they're not willing to live within their means. If you're one of them then you'd be converting unsecured debt into secured debt by paying with HELOC instead of regular loan.
OTOH if you're managing your debt correctly then I would do HELOC and multiple 0-3.99% credit cards that you can flip when they come due.
Personally I moved 85k of HELOC to credit cards which saves me around 6k interest this year. But I also have ZERO debt besides my mortgages. Keep in mind that this will lower your credit score due to these credit card lines being utilized. I had 720-740 score before I did this and my score was 620 the last time I checked. Therefore don't practice this if you plan on obtaining loans/mortgages after that.
A:
Originally Posted by lono
It is my understanding the HELOC is not tax deductible interest.
That is not correct. The first $100,000 borrowed on HELOC for purposes other than home improvement are tax deductible and borrowings for home improvement purposes don't have this 100k limit.
A:
Originally Posted by mephisto
That is not correct. The first $100,000 borrowed on HELOC for purposes other than home improvement are tax deductible and borrowings for home improvement purposes don't have this 100k limit.
I agree with this. Go w/ plan B. A lease is the worst scenerio, followed by purchasing a new car w/ car loan. Best bet....buy using home equity= tax benefits but buy the 05 because of the huge depreciation history on the Elise.