You are not alone if you plan to turn your following tax refund into purchasing a used car. The Wall Street Journal has shown that over one-third of Americans will be doing the same thing as you, or they will put the money into repairs. You will only have a certain amount available to spend, so you may want to have a loan pre-approved already just in case you find a vehicle over your budget. Other than that, here are a few simple tips to get you on the right track.
Make a large down payment:
This is an excellent way to decrease the amount of your monthly payment and lower the overall amount of interest that you will have to pay off. This is the single most beneficial way to approach buying a used car. If you have a significant enough return, you can even get the seller to come down on the price to match what you have in your pocket. Cash talks, and if you have a wad of cash available when you are looking, many dealers and private sellers will work with you.
Save for cash payments:
If you are trying to build your credit up or do not want to part with that much money at once, you can make the payments that the lender has set up. You can make some payments ahead of time or pay them due. Either way, you should have a substantial number of charges covered, so you will not have to worry so much about making the payments every month. Putting the cash into a savings account may be a promising idea to prevent spur-of-the-moment purchases. Plus, you can earn a little interest in it.
Get you excited about the car you can purchase with your tax refund money. You will see that used car dealers flood the market with advertising to get your blood pumping towards the beginning of the year. Some of them will even offer you a used car tax refund deal. This could mean a massive discount upfront, a free way to cash your refund check, or even lower interest rates. Watch for them and take advantage of the dealers that offer them.
Pay off existing loans:
If you already have a car loan, you can pay it off with your tax return and use it as a good trade-in for your next used car. This is an effective way to trade up to something newer or something more practical without getting yourself into two separate loans and or getting two cars when you only need one. Of course, this will only work if you get enough back to pay the loan off. If not, you will want to consider paying the current loan off before attempting to get another one. Sure, you could sell your car for what is left on loan, but that does not always work out best.
Buying a used car with your income tax return is one of the most common ways people upgrade their current rides. If you do this every year, the trade, along with the cash payment, will continually allow you to step up to better cars until you have reached the goal that you have set for yourself. Remember, though, you need to take numerous steps before buying your used car, including having it checked out by a mechanic you trust.