I have a chevy suburban lined up to purchase for 10k. By my research, it has a market value of 13k. My goal is to keep monthly payments as low as possible while also being financially responsible. My options are:
- a traditional car loan, which would prob equate to 250-$300/month payment
- using my existing (unused) HELOC to purchase the vehicle and paying only interest on the amount...probably around $45/month. I have a HELOC line of $120k and no additional debt.
Normally, i would never use a HELOC to purchase a vehicle, but my current situation has me reconsidering and I'd love your input.
My thought process is this:
- purchase this vehicle with HELOC
- pay ONLY interest UNTIL the market value is in line with what i paid for it (maybe 2-3 years?).
when market value aligns with what i paid -
a) sell the vehicle and pay off the HELOC. in this scenario i would have had a great car for 2-3 years and only paid $45/month for it...then i could 'rinse and repeat' or go a diff route altogether
b) begin making principal payments as well in order to keep pace with further depreciation
So far, when i run this idea by people i've received general feedback along the lines of 'that's the worst idea i've ever heard'. to me it seems like a low risk situation. At worst, i wouldn't be able to recouple all that i spent on the vehicle, leaving me in a position to cover the difference in sale. This amount would likely be rather reasonable. I'm not too worried about having a 10k lien against my home as i have 120k in equity and even if i didn't, its not enough to sink me financially.
upside (in my eyes) - great car for super low payments, leaving me an extra 250-$300/month to put into an emergency fund or other savings account.
downside - might not be able to recoupe all i paid and have to pay a smallish lump sum upon sale (if i chose to sell when market value equals the amount i paid).
my question to you is 'what am i missing?' Surely there is a reason that people thus far have reacted so negatively. Or are they just having a knee-jerk reaction based upon the insanity of the recent crisis where people were using home equity for luxury items and then ending up under water? given the amount of the purchase and the likelihood of recouping my payment price, i feel like this is a reasonable risk/reward scenario. what do you think? i appreciate your perspective and input!