I'm hoping to buy my first house within the next two years. My current Santa Fe is great transportation for at least another five (provided nothing happens to it) but I'd like to add a new one when I get the house. I talked with a lady who added the cost of her Audi onto the mortgage when she bought her house so she could pay 'cash' for the car.

The Pros: I crunched the numbers, around 25-27K for a new Santa Fe on top of a mortgage doesn't make that much of a difference in the monthly. Plus I'd prefer NOT to have a car payment.

The Cons: It doesn't make sense be technically making payments for 30 years on something that will wear out in 10-15 years.

What does everybody think of this idea?

 

Don't do it. It's stuff like this that got us in this mess.
You probably wouldn't find a bank willing to let you do that now anyway. It's much easier to do that when you refi a mortgage.

Don't use your house as a bank account. I know a few people who refinanced their house every few years to roll their credit card bills in there. They just continued to get deeper and deeper in debt. Now they have negative equity in their house and would need to bring money to closing if they sold their house now.

 

Amen brother! Between houses I am selling and people I am refinancing it is all over the place. I would say 30% are in this situation right now.

 

Why would you even consider buying a new car if you are happy with your current car and it will last you 5 more years? And this would be in addition to your current one?

Don't do it.

Plus, if you're two years away from buying a house, then you shouldn't even be thinking about this now.

 

Not only will you be paying longer, but do you realize how much more you'll pay on the compounded interest?

 

It only makes a little sense if you have pleanty of equity and can refinance to a much lower rate. Under that circumstance your monthly payment could go down. Even then it would be wiser to do the refi then buy the car with an auto loan.

For you, I don't see it happening on a purchase as the only equity you might start with is your down payment.

 

It was just an idea. I was wary of it and I was hoping you guys would talk me out of it. You succeeded. Thanks.

 

That pretty much sums it up... And most people don't keep cars for 10-15 years, but they do hold the note on the house for 30. Just doesn't make sense to still be paying on a car that you got rid of years ago.

 

I'd like to see the numbers.

Assume $25k on the car for 6 years at 5.9% - what is the total cost of all payments?

Then, assume $25k at 4.5% for 30 years PLUS tax reduction on the interest paid - what is the total cost of all payments?

Whichever has the lower total cost of all payments is the better deal, no? Besides the fact you can make a "balloon" payment on the mortgage for whatever amount you sell the car for later - effectively removing it from the mortgage.

My guess is the interest differential is not enough to overcome the loan term differential - but I'd like to see the numbers before I decided.

Maybe thats just me.