Home Equity Loan vs. Auto loan Calculator
A home equity loan can carry a lower rate than an auto loan, but usually a longer term — and it puts your home on the line. Compare the real cost of each.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Amount to finance
- $30,000
- Auto loan rate
- 7.50%
- Auto loan term (years)
- 5
- Home equity loan rate
- 8%
- Home equity term (years)
- 10
by $7,610 over the life of the loan
- Auto loan payment$601.14
- Auto total interest$6,068
- Home equity payment$363.98
The math behind it
The calculator amortizes the same amount financed as an auto loan over the auto term, and as a home equity loan over its own (usually longer) term, each at its own rate. It compares the total interest paid on each and names the cheaper one. Because a home equity loan often runs much longer, a lower rate can still produce more total interest than a shorter auto loan.
Assumptions & limits
- Both options finance the same amount, but each uses its own rate and term.
- Closing costs on a home equity loan — appraisal, origination, and title — are not included and can be significant.
- The comparison measures total interest, not tax effects.
- Fixed rates are assumed; a home equity line of credit with a variable rate would behave differently.
- A home equity loan is secured by your home, a risk the dollar comparison alone does not capture.
Common questions
Is the interest on a home equity loan tax-deductible if I buy a car with it?
Generally no. Under current federal rules, home equity loan interest is deductible only when the funds are used to buy, build, or substantially improve the home securing the loan. Using the money for a car does not qualify, so do not count on a tax break to make it cheaper. Confirm your situation with a tax professional.
Why might a lower-rate home equity loan still cost more?
Term length. Home equity loans commonly run 10 to 20 years, while auto loans run 3 to 7. Even at a lower rate, paying interest for twice as long can produce more total interest than a shorter, slightly higher-rate auto loan. The calculator compares total interest so this shows up clearly.
What is the real risk of using home equity for a car?
The loan is secured by your house, so falling behind puts your home at risk over a depreciating vehicle. An auto loan is secured only by the car. The lower payment a longer home equity term offers can be tempting, but weigh it against tying a fast-depreciating purchase to your most important asset.