Posted Monday, Feb 07, 2022
If you need a new-to-you vehicle and are planning to use your tax refund to get it, there are a variety of ways to use tax refunds to buy cars. You will want to understand all the ways this can work to make sure you’re getting the most out of your refund and what will benefit you best.
Before you decide how to use your refund to buy a car, you should research what kind of vehicle you want and need. Unless you’re paying cash, you never want to get yourself into a financial position where you can’t afford the monthly payments.
Most dealerships have various payment options, but there are pros and cons to all of them so make sure you analyze the details carefully. At Citywide, we are offer creative financing so you can achieve even more by using your funds to receive maximum value.
Most vehicle financing comes with high-interest rates. To help avoid that financial dig, it is wise to consider using your tax refund as a down payment for a couple of reasons. First, it will lower the amount of money you have to borrow for the car which can shorten the time you need the loan for; and second, that shorter time and the lower amount will lead to reduced overall interest at the end of the loan term.
For example, let’s say you are approved for a $1,000 car loan at 4% for a certain number of years. At the end of those years, you see you paid over $950 in interest payments. But, let’s say you get a refund of $6,500 that you decide to put towards the down payment of that $15,000 loan. You would only need to finance about $8,500 making your years of the loan a little less (or at least the monthly payments) and interest payments less, thus, saving you more.
Depending on the dealership you may be charged fees for varying work such as inspections, title reports, Carfax, document fees, etc. You may want to use part of the tax refunds to buy cars, but it may be wise to hold onto a little bit of the money to help pay for various fees or unexpected expenses.
By the way, City Wide pays for all the licenses, tags, and other fees.
You may be in a great position to trade in your vehicle to get a newer, larger, or more updated car. If that’s the case, you will want to make sure you get top dollar for your trade-in but be sure it’s the car you want and talk things over with the salesman. You might be able to use your refund, plus your old car’s trade-in value, and walk away with no loan at all!
It is widely known that when tax season hits, many people will take their money and head off to the nearest car dealership to help them get a better and more reliable ride. When it comes to financing that ride, having your proof of tax return can go a long way in showing a lender or lessor that the borrower is serious about making the regular monthly payments on time.
City Wide Motors doesn’t just want you to drive your dream, we want you to succeed so you can bring those dreams to life.
If you are in a lease agreement, many dealerships will allow you to use your tax refund to get more time on the lease. (Just so you know, City Wide has fantastic rental and leasing options available.)
Unfortunately, there are some situations where seeing a large refund check can make a person forget about their monthly budget and focus on the lump sum they receive. However, you must remember the tax refund is just one item.
If you need financing for the car, you will need to make sure you can afford the monthly payments. Otherwise, you may find yourself in a bad situation. At City Wide, we want you to be successful car owners, and that means we can work with you on any number of situations that affect your finances.
When shopping for a used car, make sure you keep your eyes only on the vehicles you’ve decided you want and only in the price range you decide you can afford. Looking at vehicles that are outside of that range, coupled with a large refund check, can push you into a loan you aren’t truly able to afford.
Be sure to ask your buy here pay here dealership about any tax incentives, programs, or other items that may be of benefit to use when using tax refunds to buy cars.
One of the most important pieces of advice we can give is to wait until you have the refund in the bank before you commit to a car loan or trade.
No matter how you decide to use your tax refund to pay for a car, you must understand the benefits and drawbacks of using the loan. There may be risks that aren’t worth the reward. And at City Wide, we will help you analyze all your options before making a decision.