Problem 3. HELOC

You are preparing to buy a car that costs\$36,000

$36,000.

You can pay for the car using an auto loan from the car manufacturer or using money from your home equity line of credit (HELOC). The auto loan charges2.75\%

2.75%interest per annum. The HELOC charges3.85\%

3.85%interest per annum but the interest is tax deductible. If your current tax rate is32\%

32%, which source of funds should you use?

Auto Loan

HELOC