Use your tax return to buy a car! It's that time of the year again, when Americans cash in an average tax refund of $3,000. That's a sweet little chunk of change, and it's just what most of us need to finally upgrade our ride. You can put that money toward financing a new car, leasing one, or shopping for a used car. Read on to discover how you can transform this extra cash flow into your dream car.
Use Your Tax Return to Buy a Car
Put Your Tax Return Toward a New Car
Generally, when you get an auto loan for a new car, you have to make a down payment equal to 20 percent of the total cost of the car. If you're like most of us, you don't factor your tax return into your budget which means that cash is up for grabs. You're free to use it as all or part of a down payment toward a brand new car.
The benefits of owning a new car are many. You're the first driver on the scene, so you can ensure your new car gets all the regular maintenance it requires for long-lasting durability. You also get to choose the trim model that speaks to your budget as well as your idea of luxury. You can even add luxury options, like a sunroof or premium sound system, to suit your personal tastes.
On a Budget? Shop the Used Market
If you prefer to skip depreciation and save money on the overall costs of your next car, give the used market a whirl. Once you secure financing, your tax return represents a big chunk - or maybe even all of - a down payment on a used car.
Buying a used car makes a lot of sense. Cars lose value as soon as they leave the lot. However, you're likely buying your used vehicle after it's weathered the worst of its depreciation, most of which occurs in a car's first few years on the road. Also, your used car comes with a friendlier price tag than its brand new counterparts. A used car is an excellent value proposition overall.
Transform Your Tax Return into a Drive-Off Lease Payment
If you want to drive a luxury car and, in a few years, trade it in for a different luxury car, you can put your tax return toward the drive-off payment on a lease. Leasing means you don't own the car. When you lease, you pay a monthly payment in return for being able to drive the car. At signing, you pay a drive-off payment and agree not to exceed a certain mileage without additional fees. Starting your lease with a healthy drive-off payment may even shrink your monthly payments.
Refinance or Pay Down Your Current Loan
Refinancing is a great option for drivers who are currently paying a high APR. When you put your tax return toward a new loan, you may end up making reduced monthly payments. Or, if you're just a few payments away from owning outright, you could use your refund to pay down your current auto loan. If you still want a new car, you can trade in your current vehicle for a new or used model.