It depends… but more than likely, the answer is NO!

It is generally a bad idea to finance a depreciating asset, but most of us do not have enough money on hand to pay cash for a new vehicle. So, we turn to auto loans… but right now, home equity lines of credit have very low interest rates, and many families are tempted to use a home equity loan to finance their new vehicle purchase.

But using a low interest rate home equity loan to buy a new vehicle may be a bad financial decision for the following reasons:

1. Interest rates on car loans for people with good credit are within a few percentage points (or less) of the average home equity loan. So, if you have good credit, the equity line of credit isn’t much of a bargain. If you have poor credit, you might pay a little more in interest, but there are plenty of banks who offer car loans for people with bad credit at reasonable rates… without putting your home at risk!
   
2. If you finance the equity loan for more than five years, you will end up with a VERY used vehicle that will still be covered in substantial debt.
3. If you can’t cover the payments, your home will be the first asset in jeopardy. None of use want to think of losing our home because we can’t make a car payment.

If you are in the market for a new vehicle and want to steer clear of the home equity method of financing, the first step is to secure the best interest rate possible on an auto loan. Personally, I prefer myAutoLoan.com because you only have to fill out one application and you receive up to four loan offers within a matter of minutes (even with bad credit). On my last vehicle purchase, I was amazed at the difference between rates from lenders like Citi Finanical Auto, HSBC Auto, and Capital One Auto Finance. Although I thought they would have about the same rates, that wasn’t the case… there was a difference of around 4% between lenders. Unbelievable.

While most of us would agree that lower interest rates are in your best interest, it is clear that sometimes a lower rate can cost you more in the long-run… but if you are certain that is the route you want to take, check out . If you aren’t familiar with Lending Tree’s service, it’s awesome. Basically, you fill out a single application and then different lenders compete for your business, assuring you the best rate possible.

CNN