I need a car. What’s the best way to pay for it?

I need a car.  What's the best way to pay for it?

Q. I think I need to buy a new car because mine needs a lot of repairs and I don’t think it will be worth the cost. I know car prices are higher now and with interest rates rising I’m not sure if I should take a regular car loan or use my own line of credit. It has a variable rate. What is the best option?

— Prospective borrower

A. You are right that it is a difficult time to buy a car.

Even if you can find a new set of wheels you like, choose the best financing option when interest rates rise is a challenge.

The best way to determine how to proceed is to try to calculate how much the loan will cost you in total, says Marnie Hards, a certified financial planner with Aznar Financial Advisors in Morris Plains.

She took a look at offers from, which found that if you have a credit score above 780, you may be able to get a car loan at a rate of just 2.4%. For a used car, the rate was closer to 3.7%, she said.

“As your credit score goes down, the interest charged on a car loan will rise, making the loan more expensive,” Hards said. “For reference, if your credit score is between 601 and 660, the average rates are 6.7% for new and 10.48% for used. The average car loan interest rate for new cars is currently 4.07% and 8.62% for used cars.

You have not stated the actual interest on your equity credit line, but the average interest rate on a 20-year HELOC is currently about 6.85%, Hards said. And as you noted, this rate is variable, meaning it will fluctuate as general interest rates change.

If interest rates continue to rise, the interest on the HELOC will rise, which will increase your out-of-pocket cost on the loan, she said. If your credit is good and you can take out a car loan at a lower interest rate than your own line of credit, it will likely be the cheapest option for you, Hards said.

“You should be able to get a fixed interest rate on the car loan unlike the home equity line of credit, so you don’t have to worry about the rate changing over the life of the loan,” she said. place to look for low interest rates on auto loans.”

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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for‘s weekly e-newsletter.