How to Use This Calculator
- 1
Enter Loan Details
Input the vehicle price, down payment, and trade-in value. Then enter rates, terms, and fees for both the auto loan and home equity loan options, plus your home value, mortgage balance, and marginal tax rate.
- 2
Review Results
See the Recommended Option, Auto Loan Payment, and Home Equity Payment cards. The Insights panel shows monthly cash flow difference, interest cost trade-off, home equity eligibility, and risk considerations.
Example Calculation
A buyer compares financing a $35,000 vehicle ($7,000 down, $28,000 loan) via a 60-month auto loan at 6.5% APR with $500 fees versus a 120-month home equity loan at 5.2% APR with $2,000 fees.
Vehicle Price ($)
35,000
Down Payment ($)
7,000
Trade-In Value ($)
0
Auto Loan Rate (%)
6.5
Auto Loan Term (months)
60
Auto Loan Fees ($)
500
Home Value ($)
300,000
Existing Mortgage Balance ($)
200,000
Home Equity Rate (%)
5.2
Home Equity Term (months)
120
Home Equity Fees ($)
2,000
Marginal Tax Rate (%)
22
Results
Recommended
Auto Loan
Auto Payment
$547.85/mo
HE Payment
$299.73/mo
Insights card shows $248.
Tips
Auto Loan Saves $2,843 Despite Higher Rate
The 6.5% auto loan costs $33,371 total vs $36,215 for the 5.2% home equity loan. The shorter 60-month term generates only $4,871 in interest vs $7,967 over 120 months — the term difference outweighs the rate advantage.
$248/mo Cash Flow Trade-Off
Home equity payments are $248.12/mo lower ($299.73 vs $547.85). Over the 60-month auto loan period, that's $14,887 in monthly cash flow difference. If cash flow is tight, the lower HE payment may matter more than total cost.
Home Equity Risks Your Home
Home equity loans use your house as collateral — defaulting risks foreclosure. Auto loans only risk vehicle repossession. With only $2,843 in savings favoring the auto loan, the risk calculus strongly favors the auto loan here.
Use History to Compare Scenarios
Each calculation is saved automatically. Click the clock icon to compare different rate, term, and down payment scenarios side by side.
Auto Loan vs. Home Equity Loan: Choosing Your Vehicle Financing
The Auto Loan vs Home Equity Loan Calculator compares total cost, monthly payments, and tax implications for two vehicle financing options.
For a $28,000 loan (after $7,000 down on a $35,000 vehicle), a 60-month auto loan at 6.5% costs $33,371 total, while a 120-month home equity loan at 5.2% costs $36,215 — the shorter auto loan term saves $2,843 despite the higher rate, because it generates $3,096 less in interest.
Comparing Auto Loan and Home Equity Loan Formulas
Both loan types use the standard amortization formula:
Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]
Where P = principal ($28,000), r = monthly rate (annual / 12), n = total payments.
For home equity, potential tax savings reduce the effective cost: Net Interest = Total Interest x (1 - Tax Rate).
The calculator compares total cost including fees and tax benefits.
Case Study: Financing a $28,000 Vehicle
Comparing a $35,000 vehicle purchase with $7,000 down payment ($28,000 financed):
Option A: Auto Loan (60 months at 6.5% APR, $500 fees)
- Monthly Payment: $547.85
- Total Interest: $4,871
- Total Cost: $33,371 ($28,000 + $4,871 + $500)
Option B: Home Equity Loan (120 months at 5.2% APR, $2,000 fees, 22% tax rate)
- Monthly Payment: $299.73
- Total Interest: $7,967 (net $6,215 after $1,753 tax savings)
- Total Cost: $36,215 ($28,000 + $7,967 + $2,000 - $1,753)
The Auto Loan saves $2,843 in total cost.
Despite the 1.3% higher rate, its 60-month term versus 120 months means dramatically less interest.
The home equity loan's lower monthly payment ($248.12/mo less) is attractive for cash flow but costs more overall.
Regulatory Context for Home Equity Loans
Home equity loans are regulated by the Consumer Financial Protection Bureau (CFPB) under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).
Critically, the Tax Cuts and Jobs Act of 2017 limits interest deductibility to loans used to buy, build, or substantially improve the securing home — interest on home equity loans used for vehicle purchases is generally not deductible.
This calculator includes tax savings for comparison purposes, but borrowers should consult IRS Publication 936 and a tax professional for their specific situation.
Frequently Asked Questions
Should I use a home equity loan to buy a car?
Home equity loans often have lower interest rates than auto loans (5-8% vs. 6-12%), and the interest may be tax-deductible. However, you are putting your home at risk as collateral. This approach works best for borrowers with significant equity and disciplined repayment habits.
What are the risks of using home equity for a car?
The main risk is that your home serves as collateral. If you default on the loan, you could lose your home. Auto loans only risk the vehicle. Additionally, home equity loans often have longer terms, meaning you might owe more than the car is worth for years.
How do the total costs compare?
While home equity loans typically have lower rates, they often have closing costs of 2-5% of the loan amount. Auto loans usually have no closing costs. This calculator compares the total cost of each option, including fees, interest, and potential tax savings.