which one is better Auto loan with 5% or Home equity loan with 6.5%
fixed for amount of $40000

There are a few things which go into it:

1. Will the HELOC be for the same period as the Auto loan?

If yes,
Auto Loan APR = 5%
HELOC APR (after tax effect) = 6.5% * (80%)
= 5.2%
now, if your tax rate is higher that 23.08%, HELOC will be better.

At 23.076, Auto will be better because of the PV of your money which
you will get back in taxes.

If you have a fixed paymnt amount in mind, 
then maybe HELOC(30 Years) is better, 241/month vs 754/month but a lot
more expensive (46760 * (1 -Tax Rate) Interest Expense)

here is what I learned about financing stuff with a home equity loan

1.) interest may be tax deductible
2.) loan is basically a lean against your propery. don't pay the loan,
your property is at risk
3.) if you sell your property, loan amount is due at closing. I experienced this.

Very good answer and quick. I would rate this ****

I would go for neither of these, but instead go for a HOME EQUITY LINE
OF CREDIT against the equity you have in your home.

You can get a Home Equity line of credit for less than 6.5% and IT IS
REUSABLE OVER AND OVER. So you buy your car and pay it off as fast as
you can so as to reduce interest expenses. If you have a tight month
with other expenses, you are free to PAY LESS on your line of credit
(only paying the interest for the month if you want). It is YOUR line
of credit and is totally flexible. You can even pay your house off in
some cases with this line of credit and then have the credit line
increased to 90% or more of the value of your home.

All in all, a much more flexible instrument than an individual
one-purpose, one-time loan with fixed rates to be paid monthly.

Hope this helps.

How about cash for the car and use the HELOC to buy a subway
restraunt, or some other HOT investment, maybe a commercial lawn
mower.  Hey everyone, what are your thoughts on this?