As tax time rolls around, our thoughts turn to what we can buy with that nice big tax refund. As it turns out, vacations are not the only thing we consider. Many Americans would rather spend their refunds on getting a nicer newer vehicle. If you want to invest your income tax refund in this way, here are some tips for using your tax refund to buy a car.
Using Your Income Tax Refund as a Down Payment
Whether you are purchasing a new car or purchasing a newer pre-owned car, your tax refund can be used as a down payment. If your refund is on the large side, using the entire amount could yield a substantial savings in your monthly car payments. It can also mean fewer months to pay for your loan, if you can budget for a larger payment. A good reason why you should use your tax refund to buy a new car is the months of paying interest you’ll save versus borrowing the entire amount of the purchase.
Tax Credit Advantages
Ensure you take advantage of all the tax credits available to you in order to boost your income tax refund. For instance, many Americans are able to take the Earned Income Tax Credit for car purchases. This can be a significant benefit. The credit can be quite large, which will contribute greatly to the income tax refund you will receive.
Newer Cars Are More Reliable
When you buy a good model used vehicle, you are buying reliability. Today, cars are made to last for many years. Using your tax refund to purchase a newer car is an investment. As with any vehicle, you will need to properly maintain it and keep it in good service. Don’t assume only new cars come with a warranty; many pre-owned vehicles come with warranties as well. Work with a reputable dealer, and be sure you ask about a warranty when making your selection.
Newer Pre-Owned Cars Are Less Expensive
When you purchase your pre-owned car from a dealer, you’ll find a pleasant surprise. Interest rates charged on used cars are typically lower than those on brand new cars. Your insurance rates may be lower on a used vehicle as well, making this option much more affordable.
If you enjoy all the newer performance components and add-ons new cars have, you may be surprised with a newer pre-owned model. You can get many of these same features offered on a newer used vehicle, but at a fraction of the cost you would have paid for a new one.
