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This article was originally published on the KSL Cars Resource Center. To read the original article, click here.
Life events. Family size. Work commute. Whatever new circumstances the spring season brings, one thing is inevitable: taxes. If you're fortunate, it's also the time to get a little cash back from Uncle Sam. What do you do when you're suddenly flush with greenbacks? Use your tax refund to buy something you've been pining for, of course, like a new or previously owned car.
Seasonal incentives mean more cash for the buyer
Nearly 60% of Americans anticipate receiving a tax refund in 2022, with an average check around $3,000. Car dealers, hoping to drum up business following the new-year sales slump, often offer exceptional deals while those refunds are rolling in. Savvy shoppers can boost their savings by taking advantage of programs such as:
- Tax refund match. For example, when you put down $2,500, they'll give you the same, thus doubling your money. Call ahead to ask your local dealerships if they are participating.
- Financing incentives. This includes lower interest rates or more flexible loan terms.
- Cash back. Certain buyers, such as military members or recent college graduates, may qualify for additional rebates. It's like adding a coupon to your purchase.
Use your tax refund now to save money later
A vehicle needs to keep up with your lifestyle, whether it's a new addition to the family or more road trips to appreciate homegrown national parks. Using your tax refund to put more down when you buy a car not only takes the sting out of the price tag, it has four major advantages:
- Smaller loan. Less principle borrowed initially leaves a reduced balance to pay back over the next few years.
- Better rate. A smaller loan means less risk for the lender, so they can offer a lower interest rate. That equates to a more reasonable monthly payment for the buyer over the course of the loan.
- Pay less interest. If you have a poor credit score, you pay a higher interest rate. Starting with a lower balance means less interest you'll ultimately owe.
- Bring more home. If you need to upgrade the family minivan or want to switch to a hybrid SUV, the extra funds let you buy bigger or better while still keeping the payment affordable.
How much is a reasonable down payment?
According to an Edmunds analysis, consumers put down nearly 12% on a new car. For a new sedan with a $40,000 sticker price, a standard refund gets you more than halfway there. Adding a trade-in drops the final price even more.
Many privately sold cars are available for less than $15,000. With the typical 10.9% down payment for a used car, and even setting aside a portion for unexpected repairs, the average tax return is enough to cover the down entirely.
Whether it's time to upgrade your college beater for something with better gas mileage or buy something reliable for a new teen driver, cars become more affordable when you use your tax refund for the down payment. Find the best deals for your bonus dollars on KSL Cars.
