Wheels up

War on Venezuela? Epic floods in the Fraser Valley? Russia vs Europe?

Nah. Instead, let’s talk about Graham’s new-used SUV.

“I know you’ve spoken on car loans in the past (they’re bad / I should lease), but I’d like your advice on what you believe is the smartest financial route for my (growing) family who wants to buy,” he writes. “I haven’t seen this particular question asked before, which is why I’m reaching out.’

G & squeeze have toiled for a year to save fifty grand, and have their eyes on a ‘lightly-used’ year-old Highlander or Sienna. They have no house (and no burning lust for one) and can boast brimming TFSAs and those weird new FHSAs.

The dilemma?

Should we put $16,000 ($8,000 each) into our FHSAs (fully invested 60/40) and $14,000 ($7,000 each) into our TFSAs (more like 90/10 fully invested) in January 2026. The remaining $20,000 would go towards a three or four year car loan.

Or do we put the entire $50,000 towards the car and slowly fill our FHSAs and TFSAs in 2026? We’d still likely need to take out a small loan to gap the final car price after tax.

Well, that’s a no-brainer. Vehicles are tools, not investments. They shed value every single day you own them. They eventually disintegrate or depreciate to vacuum-cleaner status, almost zero. You can’t draw income from one, live in one, borrow against one or sell one for a gain. It’s a ride. Period.

Putting another $16,000 into well-invested TFSAs will yield major benefits in the decades to come, helping to create a retirement income stream that’s tax-free without impacting government benefits or pushing you into a higher CRA bracket. Sweet. Chunking money into the FHSAs will net an immediate tax deduction, allow tax-free growth, and then a taxless withdrawal to buy real estate, or roll the dough into an RRSP. It’s a total gift.

There are far, far better places to put cash than into a hunk of metal.

So now Graham asks… okay, how do I finance the car?

“What type of loan should I take? Used car loans are garbage (north of 8% with an 800 credit score). Would it make more sense to use a line of credit towards the vehicle if the rate is lower than what the dealership is offering for financing? The current line of credit rate is 6.45% (Prime + 2%). I’d be looking at taking a $30,000 to $35,000 loan out, but plan to aggressively pay it down since our FHSAs and TFSAs would already be filled in the new year. Our RRSP rebates in April is one large bulk payment alone.”

That is exactly the recommendation – using a LOC and not even applying for one of those nasty bank car loans that TNL@TB doesn’t want to give you anyway. Bank loans suck not only for the ridiculous level of interest involved (you’re borrowing money to buy something that is worth less every week, remember…) but also for the fact you’re on the hook for the entire repayment period with no break for retiring it early.

A line of credit, in contrast, is cheaper, always open for repayment and by giving tou clear ownership of the vehicle may result in lower insurance premiums. The downside could be increased interest next year or in 2027 if the Bank of Canada decides to force prime rates higher. But any hikes will likely be modest, and still not put you anywhere near the bank loan rate.

As for buying/leasing, remember there is no money to borrow when you lease. You get a new car. No maintenance issues. You might also negotiate free servicing for the lease period. You know in advance what it will be worth at the end of the lease period, when you drop off the keys and get new wheels. Instead of making an emotional and financial commitment to a machine, you treat it like… a machine. The monthly may be higher. The stress is lower.

Over to you, Graham.

“Your insight and advice are appreciated,” he says. “If you’re really nice to me, maybe I’ll even name my eventual second child after you. Unless you don’t like ‘Garthielle’.”

Love it.

About the picture: I am sending you this picture of Roxxy to use on the blog if you wish,” writes Melanie. “She has a very big personality in a small body and is very crafty. She will work every angle, especially for extra treats. We try to take her for at a walk every day. She likes to explore and will walk as long as you want. She also likes to cuddle and will curl up over your head or on your shoulder (on the couch or in bed) and will often want to lie on top of you or curl up in your arms. But what she loves best is being able to sit at a window and watch the world go by.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/12/11/wheels-up-3/