Having to pay $800 every six months due to gas and insurance isn’t ideal if you aren’t using your car that often. However, buying a car outright could leave you with little or no wiggle room in your budget to account for unexpected car repairs or other emergency expenses that pop up from time to time. Fortunately, some tax refund strategies can help you get an affordable car without sacrificing too much of your hard-earned cash. Here are five different ways to use your tax refund to purchase a new vehicle.
If you have an existing loan on your current vehicle, using your tax refund to pay it off will help reduce your monthly payments. If you are planning to keep your current vehicle, make sure to factor in extra money for regular maintenance, repairs, and fuel costs before deciding whether to go ahead with repaying any portion of your loan now.
If you plan to finance your new ride, shop around and compare interest rates. If one dealership’s rate is higher than another’s, it may be worth moving on. One note: The longer your car loan terms (say, 60 months), the lower your monthly payments will be; but don’t stretch it out so long that you could wind up paying more in interest over time.
While many people think of using their tax refund towards a down payment, make sure you’re aware of all your options before making such an important decision. If your plans for buying a new vehicle revolve around getting approved, make sure to leave enough money to cover what you think could be due and roll over any remaining amount into an account that won’t get eaten up by fees. Some banks even offer bonus interest rates on un-withdrawn funds.
A new vehicle cost an average of about $35,000 in 2016. If you had to take an auto loan to finance that purchase at an interest rate of 3.5%, your monthly payment would be $1,000 (assuming 20% down and no other fees or taxes). That’s $12,000 per year in payments alone. According to Lantern by SoFi, “You can save yourself some money by looking into purchasing used vehicles. They often cost thousands less than new cars and provide plenty of value while still providing dependable transportation.”
Before purchasing your next used vehicle, make sure to look into some of these tax return filing options. Tax return filings are great resources designed to help individuals save money on their taxes. Not all these options are suitable for all buyers, so be sure to research the options before deciding whether or not it’s right for you. Here are some popular filing methods
With leasing, you aren’t technically buying your vehicle. This allows you to get into a new ride every couple of years without dropping all that cash up front. Leasing also gives drivers more control over their monthly payment—and, in some cases, can mean an even lower monthly cost than if they had bought outright. If you decide to lease, make sure to factor in things like registration fees and other extra costs when deciding whether or not leasing makes sense for your situation.
There are several different methods that individuals and businesses alike use to get a new vehicle. In some cases, upgrading from your old car might be your only option. However, in other situations, getting a brand new vehicle is essential in order to ensure safety and security on roadways and at work sites. Regardless of your situation, always consult an accountant before deciding how best to put your money toward replacing or upgrading your vehicle. The tax implications of specific options could save you hundreds or thousands of dollars over time.