• Feb 4th 2009 at 6:29AM
  • 40
The economic stimulus bill just got a whole lot more interesting for automakers and car buyers alike, as a proposal to make interest on auto loans deductible has been voted in. The proposal, which was championed by the National Automotive Dealer Association, was voted in by a bi-partisan 71-36 vote. If the $800 billion stimulus bill passes the Senate and this provision survives, car buyers will be able to write off auto loan interest on their taxes, saving about $1,500 on a $25,000 car purchase. The new legislation will mark the first time since 1986 that car buyers will be able to write off their car loan interest. It's likely that automakers will shy away from 0% financing in the future and offer more cash rebates for slow-selling models (read, all models) so customers can maximize their savings.

Lawmakers and NADA are hoping the provision will help generate interest in new car purchases, but some detractors feel more should be done up front to encourage car-buying. That may be true, but after looking at January's sales figures, we're guessing that automakers aren't going to look a gift horse in the mouth.

[Source: Automotive News, sub. req'd]

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    • 1 Second Ago
      • 6 Years Ago
      Another idiotic idea from Congress, entice people to rack up more debt when everybody is reeling from the debt they already racked up.

      Maybe, NOT allowing individual states to set emissions regulations, and allowing the big three to go bankrupt and restructure their expensive labor force might be a better idea?

      BTW, when did we get 107 senators (71 for, 36 against = 107)?
        • 6 Years Ago
        Well then they need to change the headline which reads, "Senate approves tax break for new car shoppers"
        • 6 Years Ago
        Yeah, I saw that too, and I'm kinda surprised that you were the first person to notice that and comment about it.
      • 6 Years Ago
      I can understand government enticing car sales with that idea but the best idea is too pay off your outstanding debts first and think of yourself first. Sure it might take $1000.00 to fix your old clunker but with the average monthly car payment now in the high $300.00 plus range, in 4 months you paid about $1200 (ex. $300 x 4 ) for a depreciating car and have 4 years to go! Add to that a higher car premium too for the new car. Leasing is a rip off, people use it to get into cars they will would have have been able to afford through regular financing. Too many people are indebted up to the tips of their hair, we have been conditioned to buy buy buy and to keep up with the "Jones." I say enough already! Just my 2 cents!
      • 6 Years Ago
      Stupid idea. Most people to benefit will be th upper income classes who will pay cash for their BMW or Lexus and get maximum benefit under a 35% tax bracket.

      If you are in the 10% tax bracket, this ain't big savings.

      I would rather provide people with tax credit of $1,500 if they replace a car that gets less than combined EPA mileage of 20MPG and is older than 7 years for one that gets at least 25MPG, and that car happens to be their primary registered car for at least the past 12 months.

      Then you get people selling their primary used car, with less fuel efficiency for one that will reduce our oil import bill and at increase car sales, with many built/assembled here in the U.S.
        • 6 Years Ago
        If you pay cash for the car, there is no interest there to use as a deduction.
      • 6 Years Ago
      A Welfare system of Subsidized Failed Automakers and Tax-subsidized Americans for buying their cars and driven on Taxed subsidized Highways.

      This should really come in handy when gas again is at 4$ a gallon.
      Welfare recipients - "suburban car buyers" - should really stop complaining when a sustainable city like NYC wants to invest in their mass transit system, which actually reduce foreign oil dependencies and creating an even more expensive highway system which we cannot currently afford....

      What we should do is make failed companies, since the tax payers own them now, to produce mass transit systems, and pod cars, which will reduce oil dependencies, instead of more dud vehicles that no one is buying. That way we can invest in infrastructure that is sustainable for a growing population, while preserving land, resources, and strengthening our local economies.
      • 6 Years Ago
      If we could learn anything from history...

      Initially, after we learned that we could write off our mortgage interest, everyone went out and bought a house. Then the "market" realized what was happening, and they adjusted the cost of homes appropriately (read: jacked up the price). It's just a stupid money game that will ultimately make cars cost more.

      #9, Dude is spot on.
      • 6 Years Ago
      This is an incredibly dumb idea. The bill should offer a tax credit, not deduction, for any car purchase that has an average MPG of 33MPG this year and 35MPG next year up to 37MPG the following year.

      Plain and simple.

      Reward purchases that are smart. Not purchases that further the status quo.
        • 6 Years Ago
        Who are you (or Congress for that matter) to decide what is the "smart" purchase? You really don't want the government getting into the business of telling you what you can and cannot drive, do you?

        I can see it now, you walk into a dealership, find a can you like, then have to submit paperwork to the government to get the purchase approved based upon your needs?

        "Sorry comrade, but you have not been approved for that Accord V6 you wanted. You have however been approved for a stripper Fit. Take it or leave it."

        I'm continually amazed at how many people in this country have no problem with incremental socialism, as long as it applies to someone else!
        • 6 Years Ago
        That would only encompass the ForTwo, Prius, Civic Hybrid, Altima Hybrid, Camry Hybrid and (I'd assume) Insight this year and the Prius, Civic Hybrid and (I'd assume) Insight next year. That's pretty limited choices - none of them especially inexpensive, either.
        • 6 Years Ago
        The only way to effect change is through the market. A way around this is to fund it with an increase in the gas tax. Say to $2/gal instead of 18.6 cents. That way, you encourage people to buy new cars while expensive gas encourages them to buy efficient vehicles.

        Mandating higher efficiency (CAFE) only goes so far until loopholes are found. It's time to get serious about greenhouse gases and our dependence on foreign oil.

        Enough of this socialist this and commie that crap. If you don't want to live where people make decisions as a body (e pluribus unum) then move to your private island in the Pacific and the gov't (who represents all of us) won't bother you. Just make sure to have your flotation device handy when the sea rises.
      • 6 Years Ago
      Well late last year I tried to buy a Caliber SRT-4 and it didn't go well. The main quibble was I didn't make enough. That's not under my control, I had to drop down to part-time status but I haven't miss a car payment EVER.

      This loan is a perfect 100% on time rate.

      Its boosted my score about 30 points since but I'm still just below 650 on my FICO score average.

      If they can stop saying I don't make enough when the loan I wanted was more than feasible in regular credit markets, that just shows what really needs to happen first is unlocking the credit market, despite what the CEO of JP Morgan-Chase says.

      So really until the credit market open up, these provision will only help those with scores above 700 and honestly if they wanted a car and didn't have a high debt to income ratio to match, they had no problem getting a loan.

      I on the other hand might have to wait until my current car is paid off to get another 10 or so point boost for my FICO score average and by then the credit markets might return to normal (2011)....

        • 6 Years Ago
        I hear you both.

        A quote from John C. Hope III, the chairman of the Whitney National Bank in New Orleans:

        “Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

        Lenders are sitting on their TARP funds to keep their doors open worry-free. Until there is a federal action demanding lenders to reassess their loan application practices (perhaps with some form of insurance from the treasury on each new loan issued?) no one with even slightly tarnished FICO scores will be able to get even moderate loans.

        Sad because there are a good deal of buyers out there (myself included) who are actually working, have well above average salaries, saving and have minimal to zero debt - but imperfect FICO scores.
      • 6 Years Ago
      the numbers here are highly questionable. there are two reasons why this sounds better than it is: (1) it's probably not a big enough deduction to make many people switch over from standard to itemized deductions, (2) it'll take quite a large car loan for the yearly interest to add up to over 2% of your income (necessary in order to claim a deduction), and (3) homeowners would still do better by borrowing against their equity (lower rates and tax deductible). a 5 year loan for $10k at 7% works out to about $400 in interest per year. this would go over the 2% cutoff for people who make $20k or less. for someone making $50k, they'd need to take out a $25k loan to hit the cutoff, and that's still only $1000 worth of deduction-- far from enough to beat the standard deduction. no, unless special rules come along with this deduction, i think it's going to completely fail to help the people who could most use help buying a new car (i.e. non-homeowners who aren't buying cars out of their league).
      • 6 Years Ago
      I'm not taxed to death. I think you've been listening to too much Savage Nation. You're a bit deluded.
      Liberals are not the reason people are taxed. Republicans do not reduce the taxes the majority of us pay. Payroll taxes and sales taxes will remain forever. Stop drinking the Kool Aid. Or at least fess up and tell everyone you don't think rich people should be taxed on earnings over a certain amount. Preach to us that you believe once a person has amassed a bulk of wealth they move into a special class who should be allowed to keep their money because they'll use it ways that makes us all better. Trickle, trickle, trickle. At least be honest and stop pretending to be speaking for the people.
        • 6 Years Ago
        I built and moved into my home in July of 2000. My real estate taxes at that time were just under $2900 and now hover around $11,100. We have one of the highest state income taxes in the nation and in the neighboring county of Cook and City of Chicago we have the highest sales tax, parking tax, services tax, etc. in the nation. All, I repeat, All have been and still are controlled by liberal democrats. You think it's a coincidence the democrats voted in the most liberal Chicago polition?
        Did you get the opportunity to look over the stimulus plan contrived by liberal democrats? Anyone with half a brain that reads it can automaticaly come to the conclusion that taxes in virtually every segment have no choice than to go up not only for the wealthy but the heaviest burden will fall on the middle class and not only for us, but for our children and grandchildren. Yeah, change is coming alright.
        I'm not a "rich" man by any means, I do live a very comfortable lifestyle providing employment for 35 individuals that make a very good living. Over the past eight months I've had to lay off most except for a skeleton crew and now because of this global warming induced coldest winter in some twenty five years that liberals are trying to sell, all are sitting at home. Most of these employees will not be called back if my personal and business taxes go up. And if they do go up to the point the liberal democrats want them to be at, I'll close up shop for good.
        Your liberal democrats, Chris Dodd and Bawney Fwank started this whole mess and now you liberals want them and the most liberal politition in this nation to fix it.
        Yeah, I listen to the Savage Nation, Rush and Sean as well. I only agree with about 60% of what they say, but they're the only ones telling it like it really is. But soon you liberals will have your way with the fairness doctrine and any opposition to the liberal plan of destroying this nation as we know it will be crushed just like the Communists crushed anyone and anything that got in their way.

      • 6 Years Ago
      My post is supposed to be a reply to this:

      'Thank God (the force, allah, buddah, whatever) for conservative influence. Liberals have taxed Americans to death....at least the economy is forcing them to give some of the money back that they have legally stolen for their BS pet programs.'

      Legally stolen? Nice.
      • 6 Years Ago
      If this is supposed to be an incentive to spur new car sales then there needs to be something in there that will also benefit you if you pay cash for a car outright and not finance it.

      I'm about to buy a used car in the next few weeks but if there was a tax benefit to buying a new one, I would switch to the new one.
      • 6 Years Ago
      I bought a new car. Where's my redistribution of funds?

      I'm still waiting for the gov't to slip that $500 of free money into my pocket while i'm sleeping.
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