As an Automotive Sales Consultant, I have helped many customers use their tax return to purchase a much needed vehicle.
So I’m here to let you know that if you’re looking to buy a used car and are also anticipating a tax return, then you can use your tax return for the down payment.
Tax returns have averaged around $3000 lately and with this amount, you can easily pay the down payment for the car of your choice or if you have an existing car loan you can pay it towards the principal and save money on reduced overall interest.
Down Payment When you’re buying a new car
You may not need to put a down payment when you’re getting a car loan if you have good credit. But if you have bad credit, lenders will need a down payment from you in order to grant a loan.
You don’t have to pay a lot usually, a minimum of $1000 or 10 percent of the car’s total price. Whichever is the less, is all that’s necessary. But if you get a substantial tax refund and can afford it, it is advisable that you put more down.
If it’s in your budget, a down payment close to 20% will ultimately save you more money in the long run in the form of lower monthly payments and overall interest charges.
A bigger down payment also improves your chances of getting a car loan approval considerably when compared to putting down the bare minimum.
Instead of using your tax return as down payment, you can also allocate the money towards your monthly payments. This can help reduce stress on your wallet, especially in those months when you’re on a tight budget.
When you have an existing car loan
If you’re not in the market to buy a new car and have an existing car loan, you can use your tax return on your current car. You can do this in two ways:
- Pay towards Principal – You can use your tax return to pay down the principal and you can save money on the reduced interest over the remainder of the loan period. This will help you to get rid of any negative equity and also possibly enable you to pay off the loan sooner.
- Restructuring the loan- You might have a higher than average interest rate if you took a bad credit auto loan. If your credit scores have since improved, you could use your tax return to refinance and get a better interest rate and lower monthly payments. Not everyone can qualify for refinancing, you have to make sure you’re at least two years into your previous loan and your credit score has improved enough.
It’s important that you explore all your options before you walk into a car dealership to buy your next car.
Every year, millions of Americans receive tax returns from the government and many of them use it to buy their next car. With a little bit of planning and research, you can also put your money to good use.
If your in the Martinsburg WV area and would like to learn the best way to use your tax return to purchase a car, please visit me, Devin, at my dealership. I will work with you to find the perfect vehicle for your budget.