Smartest financing/Tax writeoff

[Vaughn MacKenzie]

OK I need "Financing for Dummies" or should I say "Tax writeoffs for dummies" advice



My truck will arrive in time to take advantage of 0% financing, instead of $2000 cash back. I'm basically planning to do 0%, but it will mean dropping my house payment at least $100 a month which I am paying extra on each month to pay off ahead of schedule. Home loan is at 7%. But if I do 0%, pay the truck off in 3 years, I can really put a lot toward the house payment.



Would it be smarter to not drop the home payment, and go for longer financing? It will cost me $1400 more in total payments if I take the $2000 rebate and finance with local Credit Union at 5. 05%, but I can make my larger house payments.



Then someone told me to refinance my house and truck together, and the truck can be a tax write-off. I don't know squat about this kind of thing and have no idea how much writeoff it would be. Also I don't want my truck & house tied in together 'cause I want to pay off the truck. I like the idea of paying off the truck in 3 years and have the title in my hand.



Another idea is, being I have a business license maybe I could do a business loan and have a writeoff that way?? Any ideas on how much writeoff a $33K truck would be worth in Washington State?



I'm open to any pointers I guess. I know this should go in the "other forum" but most of the new truck buyers and financiers are hanging out here



Vaughn

 

[Whitmore]

Vaughn, I did this once with advice from an accountant, you own the truck personally and then lease it to your company, this way your company can write a check to you once a month, dont know if it is still allowed but it worked for me 10 yrs ago.



If I were you I would keep them seperate but re-finance your house, I checked a month ago and the rate was 5. 35% for a house loan, from 7% that would help you alot, you can also finance the amount needed to complete all the paper work if you dont have it up front.



cheers, Kevin

 

[Vaughn MacKenzie]

Thanks Whitmore. I just refinanced 2 yrs. ago, but I'm going to check into it again! I have $40,500 left to pay on the house.



I only do about $1000 a year with my business, so I don't know if I can do much with that, if it matters.



Vaughn

 

[Ladders]

Ck w/ a "shyster"

and you could do a re-fi on the house w/ enuff to pay off the truck (if you have the equity). Then the interest paid on the hse is deductible. Another thought, ck with your CU and the 2k back for a longer loan @ some % will net you more. If you can get access try the USAA.com site. They list the different rebates/loans and which way would benefit you. #yrs at 0% will cost you over taking the 2k and doing - like 4yrs @some percent. Dont recall the figures but you should be able to find the chart at the site (even if you not a member).



Da Diesel-less SOTSU!!

\\BF//



Here's the chart (didnt format correctly but u shud get idea):



Financing vs. Rebate

Promotional Offer - $1,000 Rebate -- $2,000 Rebate - $3,000 Rebate - $4,000 Rebate

0% Finance Charge - Finance with Dealer - Finance with Dealer - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA

2. 5% Finance Charge - Finance with Dealer - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA

3% Finance Charge - Finance with Dealer - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA

4% Finance Charge - Finance with Dealer - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA - Take the Rebate Finance With USAA





If you decide to take the 0% deal, you'll have a low-interest loan. However, if you take the rebate and finance with USAA, you'll have a competitively priced loan... .



ALSO, the interest rate I see is about 4% for re-fi (variable) for the house. USAA is about the same as a CU rate. As another note, they now accept active enlisted members but dont know if ex-military (ie: retired) can qualify.

 

[Rich Hoefer]

I refinanced

Vaughn, I refinanced my house, and got enough extra money to pay for my truck. I have the title to my truck in hand and the total interest paid on the house refinanceing is all tax deductable, but if you finance the truck through your credit union, that interest is not tax deductable. This is toattally legal. I have a clear title for my new truck, I did pay off a couple small extra debts, and the total house refinance payment is less than I was paying, and I have a new truck to boot.

 

[Hammerhead]

This is what I did. If you don't want your truck completely added to your house then the easiest way I found is to get a second mortgage for the price of your truck. You can still pay it off in three years if you want, but you get to deduct all of the interest off your taxes for as many years as you finance it for. This works much in the same way as a home improvment loan only your using it for a new vehicle instead. . Also, If the truck weighs more than 6,000 lbs, There is a new wrinkle in the tax law that allows you to deduct up to $38,000 of the purchase price of your vehicle under the "farm impliment/worktruck" statute. If you do it this way, then it seems possible to use your truck twice as a deduction on your taxes. Some people I work with saw a show on CNN about this new tax law and how people with business's were buying the new H2 hummer and writing off the full $38,000 on thier taxes because it weighs more than the magic 6,000 lbs. Hope that this helps. I would check with an accountant to get the specifics but this is how it was explained to me. Good Luck!

 

[CPritchett]

Vaughn: Remember there is a $25,000 depreciation for the first year on a new vehicle that weighs 6,000 lbs or more if used in farming or a business, that is about $7,500 back in your pocket the first year in tax savings if you are in a 30% tax bracket. I picked my truck up yesterday and financed part of it through Chrysler and got 4. 49% interest rate on 48 months.

 

[bighammer]

I would refinance your home. Just checked out an internet mortgage site (Homebound Mortgage) that had 15 year at less than 5% for 15 years.



I wrote a check for my truck on a home equity line of credit (HELOC) at a similar rate. It's a variable rate, but I should be done with it soon. Much better than what the banks were offering.



Another option would be to refinance with cash out. (to pay for the truck) Then pay extra each month so you aren't finacing the truck for the life of your mortgage.

 

[ladyjaine]

Refinancing the house and truck together means it will take you the length of the mortgage to pay off the truck. 15-30 years to pay off a truck? Yuck. That's way too much in interest paid out to be worth it.



HELOC (Home Equity Line of Credit)is tax deductible, isn't the same length of time as the mortgage. Separate loan. Could be a good idea.



I'd get the 0% loan if I could. Free money? Yeah! Depending on my tax bracket, I might get a HELOC and use it to pay off the 0% loan, but slowly, because I'd have most of it invested. I earn interest on the investment, save on taxes because of the HELOC, pay off the truck at no cost (note at 0% is free) and have a cushion to play with. If the Heloc repayment is a longer term than the truck note, you can do this. At the end of the truck note, pay off the HELOC in full. Or, use the HELOC to take care of other bills and free up money for the truck payment. Depends on who you owe how much.



Don't refinance your house if you've already paid a lot of years on on it. It isn't worth it. After the numbers are crunched, if you are 7-8 years into a 15 year mortgage, you LOSE money if you refinance for another 15 years. Sounds odd, but do the math. Instead of paying interest for 8 years, you're paying interest for 15. Even at a lower rate, you've shafted yourself. When you figure in the cost of the refi, it can be even worse.



No, I'm not an accountant, nor do I play one on TV. I'm just into collecting compound interest whenever possible , not paying it.



Don't get me started on paying off houses early. You don't want to hear it.





Jean

 

[BV]

how to pay

I did the home equity thing to remodel kitchen and buy the 99 Ram. It was a good idea at first but like the others mentioned you end up with a 15-20-30 year car/truck payment unless you pay extra each month. The Ram has been gone for 6 months now and I still owe 15k on the loan - Glad it's partially deductible

 

[Posm]

Don't wrap your truck into your mortgage. Your 30K truck will cost you 50K and be long gone when your still paying on it.



There is no financial institution in the USA offering 0% interest loans. All 0% loans ARE subsidized as a marketing gimmick. Some may be worth it but many are not. When you weight the option you need to make some honest assumptions.



Two scenarios on the same truck. A $40,000. 00 03 3500 loaded



Joe goes in with a 02 that is paid for and gets $29,000. 00 trade in. He will finance the $11,000. 00 difference for 24 months. His total interest cost will be about $820. 00 on a 24 month note if he finances for 7% interest. He will pay $0. 00 interest if he takes the 0% financing. However if he gets his own financing he will get the $2000. 00 cash back and will only have to borrow $9000. 00 and the interest will be about $670. 00 total. He should take the 2K cash back and look for a Credit union with low rates.



Bob goes in with the same 02 and he owes $29,000. 00 still. The dealer will pay it off, but he will need to finance the entire balance on his new truck. Bob's first years interest will be more than the $2000. 00 rebate (about $2400. 00), so he should take the 0% interest.



Most people will find if they have $10,000 or so in equity that it will be a wash with the 0% or the cash back. One thing to remember. If you take the 0% and do not go the full term of the loan, you do not get the full benefit. If you take the cash back and then sell, wreck,pay off, or trade the truck you still get the benefit of the cash back. I see a lot of people here with 2 year old trucks that are trading up. They would be better off taking cash back if they are not financing a large percentage of the purchase and they intend to trade in a year or two from now.

 

[BillGotthelf]

I agree with POSM . Without knowing your income and tax circumstances an accountant will not give you any advice. When my 2003 arrives I will be taking advantage of the 0% financing. "Free" money is hard to find.

 

[Posm]

Bill

The jist of my post was that there is no free money!!. You have to give up a $2000. 00 rebate in my area to get 0%. Who is really paying for 0%.



One more example Choose between financing $30,000. 00 at 0% for 36 months or taking the 3. 9 for 48. With the 0% your total payments will be 30K. (36 *833. 33) With the 3. 9 for 48 your payments will total $30286. 08 ($30,000. 00 - $2,000. 00 rebate 48 * 630. 96) If you take the cash rebate and pay the truck off in 3 years you will save about $300. 00.

 

[Vaughn MacKenzie]

When I punched in the numbers on a loan calculator it came out to saving $1400+ by going 0% for 3 years instead of taking the $2000 rebate and financing for 4 years @ 5. 05%.



The greater amount of your truck you have to finance, the better 0% becomes. In my case my trade will be at best $1500 over what I owe. I will probably go with 0% financing.



By the way. . .



Thank you everyone for all your input and advice. Wow I have a lot to read through!



My dad is an accountant but he is in a remote part of Mexico and communication is very limited right now.



Vaughn

 

[Harley152]

To those who don't want to add the truck to the total term of mortgage, around here property values increase around 7 to 10 percent per year(sucks in april) BUT if you refi at current rates <5% from your current >7% , take the $2000cb from chryco--then immediatly refi the house including the truck,pay off the truck with the extra from the mortgage refi---look into 15 year fixed---you have $2000 in "bomb" funding and your mortgage payments are nearly the same, AND you have the pinkslip on the truck!!! In 5 years---you have much more VALUE(and equity, because of the VALUE) in your house, your truck is just broke in, and life is good!!! Your property values have increased, you pretty much got a free truck, you pay about the same in mortgage payments, the only thing bad is the spiraling property tax rates.

If Bill Gates builds a $50,000,000 house in your neighborhood GOD won't be able to pay the property taxes anyway!!!!!!!



Just my $. 02 worth,



Jerry

 

[Elite1]

Originally posted by ladyjaine

Refinancing the house and truck together means it will take you the length of the mortgage to pay off the truck. 15-30 years to pay off a truck? Yuck. That's way too much in interest paid out to be worth it.



HELOC (Home Equity Line of Credit)is tax deductible, isn't the same length of time as the mortgage. Separate loan. Could be a good idea.



I'd get the 0% loan if I could. Free money? Yeah! Depending on my tax bracket, I might get a HELOC and use it to pay off the 0% loan, but slowly, because I'd have most of it invested. I earn interest on the investment, save on taxes because of the HELOC, pay off the truck at no cost (note at 0% is free) and have a cushion to play with. If the Heloc repayment is a longer term than the truck note, you can do this. At the end of the truck note, pay off the HELOC in full. Or, use the HELOC to take care of other bills and free up money for the truck payment. Depends on who you owe how much.



Don't refinance your house if you've already paid a lot of years on on it. It isn't worth it. After the numbers are crunched, if you are 7-8 years into a 15 year mortgage, you LOSE money if you refinance for another 15 years. Sounds odd, but do the math. Instead of paying interest for 8 years, you're paying interest for 15. Even at a lower rate, you've shafted yourself. When you figure in the cost of the refi, it can be even worse.



No, I'm not an accountant, nor do I play one on TV. I'm just into collecting compound interest whenever possible , not paying it.



Don't get me started on paying off houses early. You don't want to hear it. Jean



Jean, Actually I do want to hear it!... . I am in the process of paying my house off early, only owe 5 more yrs. on it, if I keep making the extra payments I make now. I also plan On buying a new 3500 ram/HO very soon. ... Marty

 

[jrandol]

Originally posted by Vaughn MacKenzie

OK I need "Financing for Dummies" or should I say "Tax writeoffs for dummies" advice



My truck will arrive in time to take advantage of 0% financing, instead of $2000 cash back. I'm basically planning to do 0%, but it will mean dropping my house payment at least $100 a month which I am paying extra on each month to pay off ahead of schedule. Home loan is at 7%. But if I do 0%, pay the truck off in 3 years, I can really put a lot toward the house payment.



Would it be smarter to not drop the home payment, and go for longer financing? It will cost me $1400 more in total payments if I take the $2000 rebate and finance with local Credit Union at 5. 05%, but I can make my larger house payments.



Then someone told me to refinance my house and truck together, and the truck can be a tax write-off. I don't know squat about this kind of thing and have no idea how much writeoff it would be. Also I don't want my truck & house tied in together 'cause I want to pay off the truck. I like the idea of paying off the truck in 3 years and have the title in my hand.



Another idea is, being I have a business license maybe I could do a business loan and have a writeoff that way?? Any ideas on how much writeoff a $33K truck would be worth in Washington State?



I'm open to any pointers I guess. I know this should go in the "other forum" but most of the new truck buyers and financiers are hanging out here



Vaughn

Vaughn, go for the 0% finance on your truck, IMO. No interest over the terms of the loan? Dont pay it off early if you go this route, it defeats the purpose of not paying any finances charges. We did the 0% on my wifes Explorer, its a great deal, makes no sense to pay cash for the car or pay off early, I can put the capitol I would have used to pay for it and invest and receive cap gains in return and have my money work for me. You can still depreciate out this truck thru your business and take the tax advantages from that angle. Between the 0% you can take advantage of on your new truck and the low interest rates why not refinance your house with the low rates, make the same advanced payments you are towards your house even with the new lower home mortgage rate and pay off your house faster. Not fully in tune with your situation but sounds like you might be able to shave off 1-1. 5 points on you home mortgage rate. That is ALOT of interest savings, if you are going to stay put in that house for a while you could do REALLY well. Unless I missed something in your post this is the route I would take. Course the decision is what you must be comfortable with.

 

[Vaughn MacKenzie]

jrandol, that's what I decided to do, and yeah, at that rate it doesn't make sense to pay off early. I am going to put as much down as I can, around $2500, in order to cut down the montly payment a bit.



My truck is getting close, it's headed out of Boise headed up to Washington



Vaughn

 

[Vaughn MacKenzie]

jrandol, that's what I decided to do, and yeah, at that rate it doesn't make sense to pay off early. I am going to put as much down as I can, around $2500, in order to cut down the montly payment a bit.



My truck is getting close, it's headed out of Boise headed up to Washington



Vaughn