Tax season is here, which means that you might have some extra money burning a hole in your pocket. If you’re in the market to buy a new car and want to use your refund towards it instead of your current income, you’re not alone as a number of people do this yearly. When spent correctly, buyers have been known to get some great deals depending on how much they were given with their returns and the latest deals that are being offered. Before heading to your local dealership, it’s important to know that dealers capitalize on this season every year, so you will want to make sure you know the best practices for tax refunds and car offers happening locally.
1. Consider Your Tax Refund First
The Internal Revenue Service (IRS) has confirmed that many Americans receive a tax refund of around $3000. This is a hefty amount of money that can be used in a few different ways when buying a used car, and some of it can even be saved if you budget it properly.
If you know that you will be getting less than $3000, you’re not completely limited with your choice of cars either. If you get something on the pricier side, just know that you might have to put forth more of your own money or won’t have any of your refund left over. On the flip side, with a lower priced car, you might be able to only give a portion of your refund or could use it to take a big chunk out of your overall costs – which means paying less for a much shorter time!
2. Use Your Tax Refund as a Down Payment
The most popular option for refunds is using it as a down payment. This step is especially important for those with a bad credit rating as the refund will give you financial and vehicle options that wouldn’t normally be available to you.
If you use your tax refund to put anywhere from $1000-$3000 down, you’re showing dealers and lenders that you’re serious about your investment and that you can be held responsible for the terms of the financial plan they offer you. By putting more down also, you can be guaranteed lower monthly payments that will be safe for you while rebuilding your credit.
3. Be Careful with Customizations and Luxury Vehicles
It can be tempting to give into any new fixtures or buying a car out of your price range, but you’ll only end up wasting your tax refund if you couldn’t afford them in the first place. If you know you can’t go without either of the two, consider your budget and plan around how spending your tax return will affect your future payments. Don’t be afraid to ask around and haggle for deals because you don’t want to get stuck in an absurd payment plan for something inefficient, but aesthetically pleasing.
4. Fix or Upgrade your Current Car
Even if fixing your current car wasn’t part of your original plan, there are a few benefits to investing in this option. First, maintaining your car costs much less than replacing it, meaning that you will probably be able to fix the tires, get a detail, and much more without spending your entire tax refund. Have a fully upgraded car can bring back that new car feel you’re craving.
Secondly, by regularly maintaining your car, you’re investing in its future if you ever want to sell it or trade it in. This will allow you to have breathing room when trying to determine a down payment and monthly bill by reducing the new car’s price by whatever your current car is worth.
5. Don’t Rush to Buy a Car Before you Refund Comes
A big mistake we see often is customers who want to spend money on a new car before their tax returns arrive. It’s easy to get excited once you see how much your calculated payment will be but what most forget is that errors exist, meaning you might get less than what you were anticipating. The IRS can catch these mistakes and will send you the lesser amount. Instead of getting disappointed, just wait to see what your final refund states.
Of course, planning ahead is important with you tax refund and we want to make sure you get the best deals possible if you’re ready to buy a car. Check out CARite.com for more information today.
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