Car Buying Tips

Using Your Tax Refund to Buy a Car

3 Ways To Use Your Tax Refund For A Car

Expecting a tax refund this year? According to USA Today, the IRS expects most refunds this year to be issued in less than 21 days, as long as the return doesn’t require further review. Here are several ways to use your refund for a vehicle.

(Article from USA Today: Where is my refund 2019?)

Finance A New or Used Vehicle

In the market for a new car? There are several ways you could apply a tax refund to purchasing your vehicle.

  • Down payment— Say you have a refund that is around $3,000, which is the average for many families. This can well cover a 12% down payment on a used car, and it also goes a long way toward the down payment on a new vehicle.
  • Lower monthly payment—Adding a $3,000 refund to what you’ve already saved for a down payment can reduce the monthly amount you’ll have to pay, and it could also lower your interest rates.
  • Auto Payments—One more way to use your tax refund in purchasing a new car is to apply some or all of it toward your auto payments. Depending on the amount of your refund, you may have close to a year of auto payments set.

Repair Or Upgrade Your Current Vehicle

In many cases, maintaining the vehicle you own is much more cost-effective than purchasing or leasing a new one. Consider getting your current car detailed, investing in a new set of tires, or sending it in for a major tune-up. A well-maintained vehicle can often make it well past 100,000 miles, so use your refund check to prolong your car’s life is a wise investment that will save you money in the long run.

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Refinance Your Used Car

If you’ve taken out a loan on a used car and are currently paying a high interest rate, using your refund to refinance your loan can cut your payments in half. Consider structuring a better loan if you have a high interest rate, or if you’ve improved your credit score since buying the car.

Whether you choose to invest in the vehicle you have, or purchase a new one, tax season is the perfect time to do so.

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