Liquidate IRA (10% penalty) or pay higher interest (10+%) car loan?

[Chowder]

I need to get a decent used car. Most in my price range do not meet the 7 year/70 miles target, so financing rates are 10+%.

When adding up the 4 or 5 years of payments, it's no contest the 10% penalty is cheaper. What is hard to gauge is potential earnings of the amount I would be withdrawing.

My thinking is since the IRA contributions can be adjusted, I'd bump that up.
I can always reduce it if need be.

On the other hand, some of the car/interest is probably deductible because of my sole prop.

Thoughts????

[frogger]

IMO, you should never turn an exempt asset into an asset that may not be exempt in the future.

And don't forget, this is your future that you're talking about. Don't spend tomorrows money today.

[HHM]

Hands down, take the loan. Never withdraw from retirement for this sort of purchase when there is an alternative.

You are getting too fancy with this...the lost earning power will ALWAYS trump fixed interest over a short term loan.

[Chowder]

Accountant said to go with the loan too. Deductible interest.
Back from the dealer with the Jeep. If I call it a 'car' I might loose my Jeep forum privileges.
Interest is 6 so, better than expected.

And hey HHM! long time no see. I studied your "Car Buying Advice I&II". Got them to drop 3k off their asking, on the phone, before I went in. Then worked them over when I got there.