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NikeWings
Active Member
Agree.....that was one of the anti HELOC points I made earlier. Not a good idea to pay interest on your accumulated equity to buy a depreciating asset anyway.
I was excited at the prospect of "refinancing" to write off mortgage interest since the heloc is unused anyway.
Since the rate is higher with rate hike looming its not looking like a good move.
The discussion is still creative and fascinating in either case.
NikeWings
Active Member
I'm guessing HELOCs won't survive deductibility many more years longer as a trade to protect the sacred mortgage interest deduction. All other deductions are pretty much gone. If you want to get creative and fascinated, find a hobby and turn it into a small business. Its about the only place left with any tax deductible benefit if you can show eventual income.
Garlan Garner
Banned
Rich politicians use HELOC's and their benefits like water. HELOC"s won't be going anywhere.
Garlan Garner
Banned
The only thing I can say to that is that its one of the only legal ways to deduct the interest of your car off taxes.
ummgood
Member
This is the problem in today's society. Just because it is deductible doesn't mean that it is a good decision...
Everyone should look at their financial situation before deciding on things like this. Most people don't and that ends up costing them money in the long run that isn't necessary.
I'll use my situation for example. I am in the 25% tax bracket. If I finance 50k for a Model 3 my credit union charges 1.95% for a 5 year auto loan. The HELOC is now 3.5% but can go up. So for the sake of this calculation I'll assume it will stay the same. For the auto loan I'll pay $2570 in interest over 5 years. For the HELOC it is $4575 over 5 years. Now that $4575 will save me $1143 in taxes. So you pay almost $850 extra for the HELOC even with tax savings. That is assuming the rate never goes up AND the person financing it is in the 25% tax bracket.
In other words never just do something because you think it is tax deductible. Always do the math or ask someone to help you if you don't know how to do it. You might find that doing something because it is tax deductible will cost you more.
NikeWings
Active Member
Yep unfortunately true.
But like FUSC, tax deductibility can have the same hook as "free". Got to do the math.......tough to beat some of those credit union deals we saw last year on a net tax basis.
Garlan Garner
Banned
Whooahh....
If you find something cheaper....then by all means go for it. Please don't put words in my mouth as I'm saying that HELOC is the best way. There was a question on the table specifically about HELOC and I responded to it. Geesh.
HELOC is a great option if you can't find something cheaper.
ummgood
Member
Sorry if I offended you. I didn't try to put words in your mouth I just read your "yes the rates are higher, but who cares" post and that is the issue. Most people would read that and assume "oh that's a good idea because you can write it off on your taxes". Honestly if you are paying more than 25% more for the interest on a HELOC it will NEVER be cheaper than the traditional car loan. Say your car loan is 2.5% then you shouldn't pay more than 3% on the HELOC or you'll lose money. Plus that is assuming the HELOC stays the same percentage. Plus that assumes the tax rate is 25%. I think in most people's situation the HELOC will never save more money with tax savings than a traditional auto loan if you shop around. Oh and that isn't even accounting that the HELOC probably has more origination fees that make it even more expensive than the auto loan.
NIGHTHAWK017
Member
mspohr
Well-Known Member
Just a few caveats on HELOC. Tax deductibility is only available for $100,000 of not-home related spending ($50,000 for single filers).
Also, AMT may apply.
Garlan Garner
Banned
I wonder If OP and many Model 3 financiers would bring more than zero to the table either from a trade in or sell car to bring some cash value?
Any equity would reduce the loan amounts needed and make it easier to secure a loan.
I also wonder if everyone knows that it's realistic for the 3 to be their only car if all they need is compact/sedan. I spoke to someone recently who never owned an EV thinking super chargers were the only way to keep their Tesla's energized. Lol
Any equity would reduce the loan amounts needed and make it easier to secure a loan.
I also wonder if everyone knows that it's realistic for the 3 to be their only car if all they need is compact/sedan. I spoke to someone recently who never owned an EV thinking super chargers were the only way to keep their Tesla's energized. Lol
I would be bring in roughly $3,000 from my trade (or, more likely, private sale) of my current vehicle, plus between $10,000 and $15,000 as a down payment. Combined with a $12,500 tax credit (federal plus Colorado, if Tesla builds them fast enough and the ***holes in the Colorado senate don't get rid of the $5000 credit), I should be in pretty good shape.
I have an 825 credit score, so not really concerned about securing the loan either way.
The reason I was wondering is because at 1.49%, the money is practically free. Whenever you see rates that low, it makes sense to look into borrowing more, and investing the cash you have on hand.
swaltner
Active Member
Many times, you have a choice of cash back from the factory or 0% finance. For example, currently, (at least in Kansas) Toyota is running a deal on the 2017 Camry offering purchases your choice of "0% financing and $1,000 bonus cash" or "$2,500 cash back". If you take the 0% financing, it's not really free, you've in essence pre-paid $1,500 in interest because you are giving up that extra cash back on the transaction.
A 2017 Camry has a base price of $23,070, so that $1,500 costs you 6.5% of the purchase price to take the 0% interest "free" money deal. This isn't the APR, but just the premium added to the purchase price because you choose to take the 0% financing deal. Now as to if that is a better or worse deal depends upon the interest rate you can get (and take advantage of the extra cash back) and how long of a loan term you keep. There are other factors at play, but 0% financing offered on new vehicles is rarely really no interest when you factor in losing out on other potential offers from the factory.
Keep in mind that the federal tax credit, I don't know about the CO one, doesn't have any impact on the cost of the vehicle. It's not a rebate or anything that you get when you buy the car. You will get it when you file your taxes for the tax year that you bought the car in. So if you take delivery in early 2018 you won't see the credit until you file your 2018 taxes in 2019.
Just purchased model S and went with Tesla financing(JP Morgan Chase) at the OP rate of 1.49% up to 6 years .... that was the best rate I could find in NY beat others including credit union by at least 1.5 % ...I would stay away from HELOC due to interest rate risk... I would certainly keep the Tesla Finance option on the table ... hopefully the model 3 will have similar financing ... please don't leverage your home with a depreciating asset (Telsa)
... unless you plan on living in your M3
... unless you plan on living in your M3
macd1995
Member
Hilarious!
please don't leverage your home with a depreciating asset (Telsa)
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