A Sneaky Way to Buy a Car

Say you're interested in a 2006 Hyundai Sonata, and you see it advertised at $14,888 if financed and $16,388 without the financing. You want to pay cash, but you are cheap. Is it possible to take the financing package and then retire the debt, thus avoiding all that interest while getting the best price? -- B.G., Portland, Ore.

You just might succeed in having it your way. That particular financing deal, offered through Hyundai Motor Finance Corp. (HMFC), didn't slap you with a penalty if you prepaid the loan. So you could have turned around and paid off the loan the day after getting the lower price.

However, buyers shouldn't be too quick to try this gambit until they read the fine print to verify that, as in your situation, there isn't a prepayment penalty or a requirement that you make several payments first. And check for hidden fees. "A dealer might attempt to charge something like a 'loan initiation fee,'" says Jack Nerad, editorial director for Kelley Blue Book. "There's no reason to pay such a fee."

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In today's car market, financing is easier than ever for buyers. Dealers stand to make money on making loans, and paying cash doesn't have the same allure it did in the past, says Phil Reed, consumer-advice editor for Edmunds.com and co-author of Strategies for Smart Car Buyers. That's why Hyundai was offering $1,000 in bonus cash to buyers who financed through HMFC, plus a rebate of $500 to $1,000.

Carry-over losses

I have $25,000 in stock losses remaining as a result of liquidations in 2004. I closed on the sale of my primary residence (for the past five years) in 2005 and stand to realize capital gains beyond the $250,000 exemption for a single person. Can I use the carry-over stock losses from 2004 to offset capital gains on the 2005 real estate sale? -- Tim Lederer, Philadelphia

Those bad stock picks will finally pay off. Yes, you can use the capital losses you carried over from 2004 to offset some of your home-sale profit in 2005.

As long as you've lived in your home for at least two of the past five years, you won't owe taxes on $250,000 in profits if you're single (the exemption is $500,000 for married couples). Exceed that amount and you'll owe capital-gains taxes on the additional profit. As with stocks and mutual funds, the profit is considered a long-term capital gain if you've owned the house for more than a year.

In any given year, long-term capital losses offset long-term gains, short-term losses offset short-term gains, and any remaining losses can offset whatever gains are left. If your overall losses exceed your gains, you can deduct up to $3,000 of the excess from other income, such as your salary, in one year. The remaining losses carry over to future years, when they can be used to offset capital gains.

It pays to switch brokers

My broker moved from a low-cost brokerage to a full-service firm. He recommends that I pay $1,500 a year for unlimited "free" trading at his new firm. I make about three trades per year, and I initiate most of them. Would I be better off transferring to a discount broker? -- Doug Day, Milan, Mich.

"Free" trading is a great deal -- for your broker. He's describing an account that levies fees based on your total assets. Instead of paying for each trade, you pay a percentage (generally 1.25% to 2.5%) of the assets you've placed with the broker. Firms use asset-based fees to minimize accusations of "churning" -- encouraging excessive trading in a client's account to earn commissions.

Unfortunately, that solution begets its own problems. NASD, the brokerage industry's self-regulatory body, has accused one firm, Raymond James & Associates, of improperly pushing clients into asset-based fee accounts when they clearly would have been better off paying for services via the traditional commission route.

In your case, the numbers speak for themselves. Move to any decent discount broker and your three annual trades will cost between $20 and $30. Since you apparently don't rely on your broker's recommendations, go with a discounter.

The real McCoy

Before I put my savings into the very attractive Orange Savings Account from ING Direct, how can I be sure that it's a real bank and not an elaborate Internet scam? I can't find it on FDIC Bank Find. -- Joy-Lily, San Francisco

No worries. ING Direct is the, er, real thING. It's part of ING Bank, one of the largest financial institutions in the world. Based in the Netherlands, ING has more than $600 billion in banking and insurance assets and does business in 65-plus countries. And its high-interest Orange Savings Account, recently yielding 3.75%, is very popular with Kiplinger's readers.

But it's no surprise that you had a tough time locating it on FDIC Bank Find, which is generally a great way to learn if a bank is insured (go to www.fdic.gov, and then click "deposit insurance"). You need to enter "ING Bank" rather than "ING Direct," and even then all 3,820 institutions with "savings bank" in their name show up on the list. An easier way to find the bank's record is to search by its U.S. headquarters city, in Wilmington, Del.

Limits to charity

I donate $10 a week to my church. In 2005 I also donated clothing, as well as furnishings from an entire house. What is the maximum allowable write-off for charity? -- Andrew Hellman, East Dundee, Ill.

Your question is more timely than you may realize, because Congress temporarily changed charitable-contribution limits as a result of Hurricane Katrina.

Contributions to public charities, colleges and religious organizations are usually limited to 50% of your adjusted gross income; any excess can usually be carried over for five years. But to encourage contributions to help Katrina victims, Congress doubled that limit, decreeing that donations made from August 28 to December 31, 2005, can equal 100% of your AGI. And the expanded ceiling isn't restricted to charities that help Katrina victims.

But here's the catch: The increased limit applies only to contributions made by cash or check, and not to gifts of stock or other goods, such as furniture and clothing. So it doesn't apply to most of the items you've donated. However, if you hit the 50% limit for those types of gifts, then contributions you made after August 28 by cash or check -- such as the $10 per week you give to your church -- qualify for the higher ceiling.

My thanks to Elizabeth Kountze for her help this month.