Use Your Tax Refund on A Pre-Owned Car

Deciding how to use your tax refund is an important decision. For many people, this refund is basically an infusion of cash that hasn’t been counted on or budgeted for, which can go a long way if things are tight financially. If this sounds familiar to you, it’s important to spend your tax refund wisely, using this money to make a big improvement in your life. One of the best ways to do this is by purchasing a pre-owned vehicle with your refund.

According to the Internal Revenue Service (IRS), most United States citizens receive a refund of roughly $3,000 each year. This is a nice chunk of change for most people, and it’s easy to get excited about all of the fun ways to spend it. We usually find that people make smarter decisions with their refunds once they really think about where that money is coming from. Your refund is all of the money that you overpaid in taxes throughout the year.

In other words, this is your own hard-earned money that should be rightfully yours, and it’s coming back to you after you basically gave the IRS an interest-free loan all year. It’s not just “free money,” and we definitely don’t recommend spending it on something silly. Instead, learn how you can use this cash infusion to get yourself into a pre-owned vehicle.

Even if your tax refund isn’t big enough to pay for a used vehicle outright, don’t worry! You can use the money you have as a great down payment for the pre-owned vehicle of your dreams. If you have enough money to make a significant down payment, it will be much easier to qualify for a used car loan if you need to. Putting down a few thousand dollars (which is an average tax return) will help you show lenders that you’re serious about paying for the vehicle.

When you can start off by making a great down payment like this, lenders will probably give you better options than they would otherwise. It also decreases the total amount you will have to borrow from the lender, decreasing your monthly payments. Maximizing your down payment to reduce the amount you borrow can also help you spend less money on interest over the life of your loan. Finally, you’re greatly reducing your chance of getting into a situation where you end up in an upside-down loan (when you owe more money on your car than you could sell it for).

A normal down payment for a vehicle would be about 10%. People who are buying new cars might want to put down more than this, possibly more like 20%, because new cars depreciate in value so quickly. Fast depreciation means you need a bigger down payment to avoid an upside-down loan. The great thing about used cars is they don’t depreciate as fast.

Your tax refund is a one-time thing (unless you overpay your taxes again next year), but car expenses are more constant. Don’t add luxury features that go beyond what your normal budget should be. Sticking to your original budget, then using your tax refund, will help you get into an easier car-buying situation that makes you feel financially secure.

For help buying a used car with your tax refund, visit Cactus Auto Sales in Tucson . We have vehicles that span a wide variety of makes and models, so you’ll be able to find any kind of used vehicle.