Most people use an auto loan when they want to buy a car. But sometimes, a home equity loan may be the preferred choice. This Home Equity vs. Auto Loan Calculator will help you compare the terms offered by home equity loans and auto loans to decide which is the best option for you. This calculator lets you take into account such factors as interest rates, closing costs and even the potential savings from taking a tax deduction for interest paid on a home equity loan to allow you to compare the overall costs of the two loans to see which is the better choice for you.
Home Equity vs. Auto Loan Calculator
Home Equity vs. Auto Loan Calculator Overview
When most people want to finance a vehicle they think that their only option is to use an auto loan. However, if they own their home then they may be able to get better terms by taking out a home equity loan instead. There are many advantages of using a home equity loan to finance the purchase of a car or truck.
First of all the interest paid may be tax deductible. Unlike interest on auto loans, mortgage interest is tax-deductible – and home equity loans are a type of mortgage. If you use a home equity loan to buy an automobile, you can deduct the interest paid if you itemize your deductions – up to a limit of $100,000 in home equity debt for a couple or $50,000 for a single person. So you won’t be able to deduct the whole amount if you’re buying a Ferrari.
Second, the interest rates on home equity loans are often lower than on auto loans and the financing can be stretched over a longer period of time. This can be handy if you’re planning to buy a higher-value vehicle that you expect to keep for a number of years.
If you are interested in determining if you should finance your vehicle purchase with a home equity loan or an auto loan then you can use our Home Equity vs. Auto Loan calculator.
Using the Home Equity vs. Auto Loan Calculator
In order to use this calculator you will need to enter the pre-tax purchase price of the vehicle in question, the auto loan interest rate, the fees associated with the auto loan, your trade allowance, the terms in months, your cash down amount, your state’s sales tax rate, how much you still owe on your trade in, the interest rate for a home equity loan, your federal income tax rate, the closing costs associated with your home equity loan, and your state income tax rate.
The calculator will process all of this information and produce a chart that compares the costs associated with financing your vehicle using a home equity loan and the costs associated with financing your vehicle using an auto loan.