Use down payment to pay off SUV in three years

Dear L.B.: I can’t imagine the automobile loan interest would be less than the interest the CD is paying. Doing it the way suggested to you would simply cost more money. If you were to put down a little bit of money and invest it in the marketplace, you may very well outpace the cost of the loan. Going from a three- to a five-year basis on an automobile, in my opinion, is very, very foolish. If you can’t afford to pay it in three years, you can’t afford the vehicle.

Not yet time to buy a car

Dear Bruce: My car has 57,000 miles on it. Things are starting to go wrong – nothing major, $50 here and $100 there. I think it’s time to trade it in. My husband says I am nuts. He says you have said many times that cars with this kind of mileage are “barely broken in.” I don’t want to be nickeled-and-dimed to death, but I need reliable transportation to get to work. I certainly don’t like the prospect of car payments, which would put a pinch on the wallet, but having these repair costs isn’t easy, either. I have reluctantly agreed to listen to your point of view. – B.U., via e-mail

Dear B.U.: Your husband and I are on the same wavelength: 50,000-plus miles is barely broken in. And when you stop to consider what your monthly payment will be for a new car, the increased premiums for collision and comprehensive coverage, the depreciation when the car leaves the dealer’s showroom, there is nothing in favor of your position. I have no problem whatsoever with people buying a new car every couple of years if that turns you on and you can afford it. As you move along in life, hopefully, your income will increase and you will be able to purchase a new car more regularly. In the meantime, unless there is some very, very serious systemic problem with this automobile, you are far better advised to keep it in good shape. Trust me, a car with this kind of mileage can and should provide you with very reliable transportation.

Don’t mix house, car debts

Dear Bruce: I’ve been considering taking out a home-equity line of credit (totaling $25,000) to pay off our vehicles. The interest rates on our auto loans are 5 percent and 6 percent. We have 11 years left to pay off our first mortgage and approximately $62,000 in equity. Would this be an advantage to us since the interest on a home-equity line of credit is tax deductible? – Erin, Laurelville, Ohio

Dear Erin: I see no advantage in borrowing against your home to pay off your vehicles. Your loans are at a very reasonable 5 percent and 6 percent. I doubt very seriously if your home-equity line would be any less and maybe more. The very tiny deduction for interest, in my opinion, is not worth playing the game.

‘Better’ car means higher costs

Dear Bruce: I currently lease an automobile. I fulfilled two years of a five-year lease, and I am happy with the car and do not wish to trade it. I have been receiving notices from various dealerships asking for my vehicle. These flyers state that dealerships need used cars such as mine. They say I can get into a better car for the same or lower payments. I don’t understand this process. What’s the catch? Please help. – G.H., via e-mail

Dear G.H.: The people sending these flyers simply want to sell another car. What they say is probably true, that the automobile you will receive will be better, meaning newer, and at the same or lower payments. However, what they omit is that you will be paying for it a good many more years when you move from this used vehicle to the new one. If you are happy with the one you have, for Pete’s sake, keep it. By the way, five years is far too long to finance a car. If it cannot be financed comfortably in three years, you are in way over your head.

College grad should find used wheels

Dear Bruce: I have listened to your program since I was in middle school, and I have always enjoyed it. I’ve now finished college, and my question is this: What makes more sense, buying a new car, a used one or leasing? My salary will be $31,000, plus commission. I can afford a down payment of around $2,000, and I would like to make the best financial decision. I would certainly appreciate your thoughts. – N.W., via e-mail

Dear N.W.: A new car at this time in your life would be a major mistake. Why put that kind of strain on your pocketbook? If I were you, I would buy a used car, utilizing the $2,000 for a down payment. This means a car that would be several years old. I would lean toward a larger car that had been well taken care of, since I believe they hold up much better. Take your time. You are not going to find the car of your dreams in a day on the used-car lot. If you spend enough time diligently searching both the dealers and private sellers, I’m sure you will find a fine automobile. And unlike many of your colleagues at work, you won’t be in hock up to your eyebrows.

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.