2020 Tax Time Savings | Use Your 2019 Tax Refund To Purchase A New Car

 
HOW TO USE YOUR TAX REFUND FOR A NEW CAR PURCHASE

If you're in the market for a new vehicle then you should know something about tax season: tax refunds and car loans are a good match.*

That's because refunds, which have averaged around $3,000 in recent years, can provide many approved buyers with a ready-made down payment on their next ride, or at least a useful chunk of it. In turn, that money down may drop their monthly payment and provide useful savings on interest charges.

How using a tax refund could affect financing

Let's see what kind of difference a tax refund might make when financing a car. A $3,000 refund, for example, goes a long way toward covering the typical 12 percent down payment on the average price of a new car, which was $38,948 in December 2019, according to Kelley Blue Book. 

Lower monthly auto payment

Here's how such a down payment might lower your financing costs. Let's say you're looking at buying a car for $20,000 and you have a trade-in worth $5,000. Using our payment calculator we can see that entering a loan amount of $20,000 (effectively $15,000 after the trade-in value), with a 72-month loan term, 3.9 percent APR, and $5,000 in the down payment field results in an estimated monthly payment of $234.

Adding $3,000 from a tax refund to make a total down payment of $8,000 reduces the monthly payment to $187 - a potential saving of $47 per month - and may also save you money on interest.

A head start on your payments

This is another option for using a tax refund for a car purchase. Instead of allocating the money as a down payment it could be used for making a number of monthly payments on the new auto loan. A refund of $3,000 could be used to make 11 payments of $269; almost a year's worth on a five-year loan term. Not a bad start.

Research vehicles and get a preapproved loan to better your position

With an idea of what you can afford and how using a tax refund may lower your costs, you'll be in good shape to research vehicles and make a great choice at Bronco Motors.

Turning your thoughts to auto lenders, consider getting approved for financing before you go. Take our preapproval credit application which doesn't require your date of birth or social security number up front so you can shop with confidence.

See if you can put a tax refund to good use

Millions of consumers receive tax refunds from Uncle Sam every year, and many of them put that money toward purchasing their next car, truck or SUV. 

* These statements are informational suggestions only and should not be construed as legal, accounting or professional advice, nor are they intended as a substitute for legal or professional guidance. Please consult a tax professional.


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