Interest on a home equity line is tax deductible, I believe. So, the balance depends upon your marginal tax rate.Would the lover 1.99% APR loan that gg found make more sense?
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Interest on a home equity line is tax deductible, I believe. So, the balance depends upon your marginal tax rate.Would the lover 1.99% APR loan that gg found make more sense?
Seriously, who cares how other people are paying for their cars? Some finance, some lease, some pay cash.
Would the lower 1.99% APR loan that gg found make more sense?
I have a different scheme in mind for paying for the car. I'm putting it "on the house", using $50K from a home equity line of credit that carries a 3.25% interest. I don't have to pay principle, and can pay interest only which comes out at about $162 per month. Principle becomes due at the end of the home mortgage term, but that still is 25 years away. I will have sold the house well before that, so it is not an issue for me.
Today, I pay $375 per month for my leased Kia Optima. By getting out of the lease and buying the Model S, our monthly payment will actually go down by $213. Plus, there are fuel savings of about $180 per month (my Kia does 22 mpg on average and I drive 1,000 miles per month), while my electricity bill will go up by maybe $40 a month. And finally, the home equity interest payments are tax deductible, uncle Sam giving me back about 1/3 so that's another $54 savings per month.
So, if you do the math, I'm actually able to lower my monthly car costs by over $400. Yes, I may need to replace the battery after 8 years, but till then I'll enjoy $400 savings per month, and, be driving a Model S instead of a Kia!
My wife still scratches her head when I explain it to her, and keeps saying something smells fishy. :wink:
Edit: forgot to mention that I invested $20K in TSLA shares (hopefully worth $25K or more by early next year) which will go towards the car as well.
A house is a depreciating asset, too; the ground beneath it is not, but most real estate value is tied up in structures, not land. Proof: if you don't spend about 4% of your structure's value annually in upkeep, it's probably going downhill.
People get hung up on borrowing vs. cash finance. Don't forget that writing a big check may leave you without sufficient liquidity in the case of an emergency. Make sure you have reserve liquidity, even if that means you need to borrow. There's nothing morally reprehensible about borrowing, provided it's borrowing within your means.
A house is a depreciating asset, too; the ground beneath it is not, but most real estate value is tied up in structures, not land. Proof: if you don't spend about 4% of your structure's value annually in upkeep, it's probably going downhill.
People get hung up on borrowing vs. cash finance. Don't forget that writing a big check may leave you without sufficient liquidity in the case of an emergency. Make sure you have reserve liquidity, even if that means you need to borrow. There's nothing morally reprehensible about borrowing, provided it's borrowing within your means.
I'll end up financing ~$70k of the purchase, assuming I can scratch up another $25k for the down payment. On the bright side, the longer Tesla takes to ramp up production the bigger down payment I'll have!
Shouldn't an enterprising bank come up with a special loan package for the Model S? There could be a primary loan, backed by the car; and a secondary loan, backed by the expected cash flow from the $7,500 from Uncle Sam.
This way, one could fully pay off the second loan as soon as his/her tax refund came through.
I like this much better than using one loan, and using the tax money to pay down the principle, save for monthly payments or refinance the loan.
Agreed; although I could sell some stocks and write a check, my financial adviser and I agreed that, with the low interest rates available, it's probably better to get a loan for a portion of the payment.
the 401K is a higher interest rate, but you are paying yourself the interest.. Downside is, if you leave the job you must pay back the loan in full within 60 days, or it's taken as an early withdrawal (%10 penalty) plus you own ordinary income tax on the amount outstanding.