Financing a used car

[lukkykatt]

A question for the financially savvy: what is the best way to finance a used car? Should I get a straightforward car loan, or run it through a home equity loan (or any other type of thing) to get a lower interest rate?

I might be buying a minivan from a friend of mine, so dealer financing is not an option. Also, in general, does the depreciation of a year old vehicle outweigh the higher interest rate?

[BillK]

The make/model and condition/mileage of the vehicle would make a difference in what's best to do. I'd guess financing a low mileage 03 Honda Odyssey with a bank would be easier (and safer) than financing say....a high mileage 03 Mazda MPV since the Honda holds it's value much better than the Mazda.

[lukkykatt]

It's an 04 Sienna w/low mileage.

[zuzu]

I'm far from financially savvy, but when we were considering getting a used car recently, our accountant advised paying for it with our home equity line of credit, thereby making the interest deductible. I'm not sure if that would also be your best bet. We went with a new car, so it didn't end up being an issue.

Actually, come to think of it, this is also how we paid for the car we bought before this one and it worked well. We already had the line of credit opened, so we didn't have to do anything other than write the dealer a check from the home equity account.

Melissa, mom to Sarah (5/03)

[kijip]

I think that your interest rate would be best on your home equity line of credit. If you feel comfortable doing that (not making the payment means losing the house) and are sure you can make the payment, it is a decent option. I have several friends who did this and always suggest it.

That Toyota has not depriciated too much in a year so make sure that the interest you pay on the loan does not end up with you spending more than you would on a 2005. On the other hand, your friend's price beats the dealer's for sure!