What To Do With Your Tax Refund and Your Car?

What To Do With Your Tax Refund and Your Car

Using Your Tax Return to Improve Your Vehicle Situation

You’ve filed your tax 2015 tax return and have already received or are expecting to receive a sizable refund check.

There are many ways to use a refund check – some smarter than others.

You could take a vacation, make home improvements or buy that big screen TV you’ve always wanted, but you could also pay off debt or invest it in your future.

For many, the reality of commuting to and from work necessitates having a working vehicle. If your current ride is less than dependable, you may want to use your tax refund to buy a car. For others, who may have a high balance on an existing auto loan, paying off a portion of that balance and shortening the length of an auto loan may be a smart decision for the future.

There are several situations where using your tax refund on a vehicle makes sense and others where it just doesn’t. Read on to find out what to do with your tax refund and your ride. 

Use Your Tax Refund to Buy a Car

If you’re currently driving a broken down vehicle with more than 200,000 miles on it, it may be time to put your tax return to work as a down payment on a new car.

Dealerships often offer 0% financing incentives this time of year but be warned that not all qualify. If possible, have your own financing lined up from a local bank or credit union you trust.

This can save you money compared to the rate given from the F&I Department. Remember, the larger your down payment, the lower your loan, lowering your risk level to lenders and ultimately your rate. 

Use Your Tax Refund to Get Above Water on Your Auto Loan

Maybe you didn’t make a down payment when you bought your vehicle a few years ago and now you find yourself slightly underwater on your auto loan. Pay the extra $1,000 or more that you get back from your tax return toward your balance to get your loan back afloat. This will not only alleviate some of the pressure down the road if you choose to trade in or sell, but it will shorten the length of your loan. 

Pay Off Your Car If You Can!

In the era of most loans not incurring early payoff penalties it’s always smarter to get it over with as quickly and painlessly as possible. Let’s say you still owe $2,000 on your car and have a payment of $200 per month. You could drag this out 11 more months and incur additional interest charges, or you can put your tax return toward paying off the loan, earning yourself an extra $200 in your pocket every month.

Pay Off Your Car Faster Without Using Your Tax Refund

When you think about what to do with your tax refund the possibilities are virtually endless.

Even though you know paying off existing debt is smarter than going on vacation, Cancun is sounding pretty good to you right about now.

Regardless of what you do with your tax refund, now is the perfect time to think about refinancing your vehicle. If you’re stuck with a high rate and either want to lower your payments or shave months off of your endless amortization schedule, fill out an application with Consumer Auto Refinance Services today and see if we can lock you into a lower rate, starting at 2.49% APR.