# Any issues with taking out loans?



## janus10 (Nov 7, 2013)

So, as it looks like I will need to replace my 2002 vehicle, and I figure that I can make more money with the cash in my hands rather than give it up a car dealer, I'll be looking to finance.

With no job, no pension, but only my wife's income and our investments and house, will there be a more difficult or stringent test for financing a depreciating asset purchase?


----------



## Just a Guy (Mar 27, 2012)

Car loans are fairly easy to get, from what I've seen and heard...if you have a pulse, they can get you a loan...

The real question is, can they get you a loan at an interest rate that makes sense. That depends on your credit rating, assets, etc. If you've got good credit and assets, you probably get a good interest rate.


----------



## sags (May 15, 2010)

If your wife is the only one with income, the car and loan will likely have to be in your wife's name.

If that turns out to be the case, I would suggest you put the vehicle ownership in joint names so it is easier to get insurance.


----------



## janus10 (Nov 7, 2013)

sags said:


> If your wife is the only one with income, the car and loan will likely have to be in your wife's name.
> 
> If that turns out to be the case, I would suggest you put the vehicle ownership in joint names so it is easier to get insurance.


Well, I will have income, but not work income. But, it looks like we will buy this vehicle before she retires as she told me that the end of this year is her tentative timeline. So, at least she is getting more comfortable with this big change.


----------



## marina628 (Dec 14, 2010)

My parents have bought a couple cars with loans since retiring ,as long as you have good credit they will give you a loan .Heck even people with bad credit and $1000 down can get a car loan lol


----------



## houska (Feb 6, 2010)

Sometimes car loans can make financial sense, due to whatever configuration of incentives the dealer has at that moment.

But, if your financial situation allows, it can make more sense to:
1. Liquidate nonregistered investments (ideally at a tax loss or close to book value, so no bad tax implications) of $x
2. Purchase car, including paying $x in cash.
3. Borrow $x from home equity
4. Repurchase similar investments to the tune of $x

You end up in the same place - car, investments as before, loan of $x - but now the interest is tax deductible since the proceeds were used for investment purposes (the investments need to have a reasonably forseeable likelihood of generating income). Of course the details depend the interest rates and car loan incentives involved, but all other things being equal, interest is better if it is tax-deductible. The issue is not the house vs car loan (assuming of course you don't intend to default), but that your can get a home equity loan in cash to establish the paper trail for the proceeds, while you can't (easily) get the car loan in cash.


----------



## Eclectic12 (Oct 20, 2010)

houska said:


> Sometimes car loans can make financial sense, due to whatever configuration of incentives the dealer has at that moment.
> 
> But, if your financial situation allows, it can make more sense to:
> 1. Liquidate nonregistered investments (*ideally at a tax loss or close to book value, so no bad tax implications*) of $x
> ...


Not a bad idea ... though there are some wrinkles to stay on top of.

The first is that if sold for a CL, assuming one wants to use the CL in the tax year the NR investments were sold - one will have to be sure the replacement investments as well as what is done in the registered accounts won't trigger the superficial loss rules.
http://www.taxtips.ca/personaltax/investing/taxtreatment/shares.htm#superficialloss

There's also the work to be sure the investments/actions taken keep the interest tax deductible.
http://www.milliondollarjourney.com/key-tax-considerations-on-an-investment-loan.htm


Nothing exceptionally difficult but it is a bit of work.


Cheers


----------



## sags (May 15, 2010)

GM has huge discounts on 2017 trucks and low financing right now.


----------



## janus10 (Nov 7, 2013)

Great idea, Houska. I just checked and I have enough equities in my NR account that are underwater to liquidate which would cover the entire cost of the vehicle. And I have enough room in our HELOC to borrow for reinvestment.


----------



## humble_pie (Jun 7, 2009)

houska said:


> But, if your financial situation allows, it can make more sense to:
> 
> 1. Liquidate nonregistered investments (ideally at a tax loss or close to book value, so no bad tax implications) of $x
> 2. Purchase car, including paying $x in cash.
> ...




is this not the Smith manoeuvre didja voo all over again, though.

for originality, i really like this quote from JAG. It's perfect for end-of-winter blahs. If you have a pulse, the world is your oyster .each:



Just a Guy said:


> Car loans are fairly easy to get, from what I've seen and heard ... if you have a pulse, they can get you a loan


.


----------



## janus10 (Nov 7, 2013)

Ended up getting a new vehicle about $600 below invoice, free oil changes for the first 3 years, 5 years of roadside assistance, $1,000 rebate in conjunction with 0% financing over 7 years. I need not have been concerned.


----------



## sags (May 15, 2010)

Sounds good..........enjoy the new vehicle.


----------

