Maybe you waited a little longer than most people to file your tax return, but that's okay. You made the deadline and, besides, there are no bonuses for filing early. So, now that you have filed and received a tax refund, you have decided to buy a car. This is probably a wise decision, but be careful.
Having a sudden windfall of cash may cause you to feel empowered enough to "go for broke" with your vehicle purchase, but it will pay off in the long run if you stay practical with your buying decision. Give some considerable thought to how the cost of ownership may vary among different vehicles and invest your money in a car that will realistically fit your budget.
Getting the Right Car with Your Tax Refund Dollars
Yes, you will want to purchase a budget-friendly vehicle, but that doesn't mean that you should limit yourself to using your refund to pay cash for a very inexpensive car. Potentially having to deal with a pile of repair bills down the road doesn't seem like a very good "bargain." Instead, your tax refund could serve as a substantial down payment on a new or late model used car.
By opting to finance a brand new or newer vehicle, you will get all of the benefits that come with driving a reliable car equipped with recent technology and safety features. And by making timely payments on an auto loan, you will have an opportunity to improve your current credit rating.
If you use a sizeable refund check as a down payment, you will reduce the total amount of your loan and lower your monthly car payment. With this in mind, it might be tempting to purchase a vehicle that is bigger and more expensive than you might normally consider. But you need to ask yourself two questions. How much will it cost to own that car? And, will the vehicle still be affordable a year from now? How about two years from now?
- Create a realistic budget. This is the best way to determine exactly what kind of a car payment you can afford. But the monthly payment isn't the only expense that you will need to take into account. You will also need to factor in vehicle-related expenses such as insurance, fuel and maintenance costs. And you should never stretch your budget to the absolute limit. Remember to leave yourself enough money to put into savings or just to have available in case an emergency comes up.
- Choose a vehicle based on your needs and budget. Even if you can technically afford to buy a large, expensive vehicle, do you really need one? It is always wise to go under budget instead of over. So, if a smaller, fuel-efficient vehicle will effectively serve your everyday needs, then you should strongly consider this option. If, on the other hand, you have a large family and require a van or SUV, you might want to look at late model used vehicles. No matter what your situation is, saving money is always a good thing.
- Stick to your decision. When you are at a dealership, it can be all-too easy to be distracted by a shiny new vehicle that is too expensive for your budget to comfortably support. So, remind yourself of all the hard work that you've put in to establishing a vehicle budget, and focus on your goal. You are using your tax refund as a down payment on a good, reliable car that you can realistically afford to own. Later, when you are not struggling to make a payment, put fuel in your vehicle or keep up with the maintenance schedule, you will be glad that you had a plan and the willpower to follow through with your intentions.
Every year, a large portion of tax refund recipients opt to use this "extra" cash to buy a new or used car, truck or SUV. If you are joining these buyers this year, make the most of your purchase and get the car that you will still love to own in the months and years ahead.
Financing for Tax Season and All Year Round
Even if you have a great down payment, you may be worried that your credit issues will complicate your car financing. Luckily, even if you have bad credit, Drivers Lane can help. We can connect you with a local dealer who is qualified to work with your situation in order to get you approved for an auto loan. In fact, you may be able to buy your car with little or no money down. Our service is free and our process if fast.
Just fill out our simple and 100% secure online application to get started today.