If you’re looking at a decent amount for your tax refund this year, you may have a lot of things you’d like to spend it on. However, before you go on that vacation or buy your season tickets, think about using it toward the purchase of your next vehicle. Your refund is an excellent down payment, and here are five reasons why.
1. It’s Enough to Cover the Average Down Payment Percentage
What exactly does that mean? It means that the average American pays 11% down on a vehicle. That’s around $2,200 down for a total purchase price (including your interest rate and other costs) of $20,000. Plus, if you have a trade-in, your monthly payment will be even lower, or you can get a higher priced car. It’s a win-win situation. Get into a new vehicle and cover a chunk of the cost right off the bat.
2. Look at Your Refund as Covering a Big Bulk of Payments
If you’ve only ever put a low percentage, or no money down, look at your refund as a way to cover anywhere from 9 to 11 months of payments. The higher your refund, the more months you’re paying ahead of time. Of course, you will still have to make payments in right away, but you won’t be paying off your car as long.
3. Lenders May Look at You as a Better/Safer Bet
If you’re working with lenders, they may look at you as someone they would like to approve or offer a better rate to. This could happen for a couple reasons—you’re monthly payments will be lower because of the amount you put down, so they know you can pay them with your income, or they see that you really want that car, and are willing to give up a big amount to have it.
4. You Could Get a Nicer Car
It’s back to the nicer car benefit. Before, maybe you only had a low amount to put down on a vehicle, so you could only get some kind of economy car. Bringing that extra money to the table keeps the monthly car payment the same per month for a higher priced car. For example, if you were shooting for $200 a month, with the right loan you can still pay that for a car that’s a couple thousand dollars more (if that’s what your refund is).
5. Your Down Payment May Make a Difference between a Purchase Instead of a Lease
Maybe you were only able to lease a car so you could have a lower monthly payment. There are all sorts of deals when you do leases. This way, by using your tax refund, you can actually buy the car. It’s an investment of your cash that can be incredibly helpful. Cars are often a necessity for people.
Larger down payments can open the door to get you the car of your dreams, even if you have any of the following.
- Poor or bad credit
- No credit
As April 15th approaches, start working on those taxes and get them done early if you can. These days, you can get your refund almost instantaneously. After you’ve filed, start looking at the cars you’d like to see yourself in, and when you get that tax refund in your hands, remember it can cover one week of fun somewhere or a car you’ll enjoy for a long while. In fact, if you’re someone who likes a little something new every few years, make it a tradition to use your tax refund for an updated ride.
Taxes don’t have to be looked at as a hassle. Instead, look at them as a great way to get something you really want—including a nicer car, or lower payments on a car. Has doing your taxes ever looked so good?
