How is your tax return looking?
In line for a refund?
Congrats (or fingers crossed!) because that money – the average check was $3,0391 in 2022 – can be a huge plus when it comes to buying a car.
Here are four ways it could help you find the road forward.2
1. Lower payments
A tax refund, especially a figure around $3,000, makes for a handy down payment on a vehicle purchase. Any money you can put down will reduce the amount you need to borrow and may lower your monthly payment, too.
The Drive® Budget Customizer is a great tool to show you how this works. First, take a couple of minutes to see if you pre-qualify for a car. Then, if you pre-qualify, use the Customizer to choose your ideal terms. By increasing the down payment, with the length and other parts of the loan staying the same, you’ll be able to see just how much your monthly payment drops.
Once you’re happy with the numbers, you’re ready to shop for vehicles that match your budget and close in on the details! Drive enables you to customize your terms for individual vehicles that catch your eye. For example, you can add a trade to the deal, if you have one, before getting your financing summary, including your updated loan amount, APR, taxes and fees.
2. Savings on interest
A lower payment is a big deal for your monthly budget, but using your tax refund for a down payment might also save you money on interest.
Reducing how much you borrow (depending on the other terms of your loan, let’s remember) can mean your total interest costs are less over the course of your contract. In effect, you pay less for your financing!
3. Money for your payments
While a down payment is a pretty useful way to use your refund, there are more options to think about. You may wish to keep the cash in a secure savings account and use it to make a number of payments on your newly purchased vehicle – a sort of “payment holiday” to get you going.
4. Pay for insurance
How about using your tax refund to cover auto insurance? If you typically pay for insurance monthly, consider whether you’d like to pay for it all upfront and avoid the ongoing expense entirely. Alternatively, you could use it for another auto expense, such as a vehicle warranty.
Set your goals in motion
Whether your tax return is looking promising or a check is already on its way, go ahead and see if you pre-qualify for a car with Drive. It’s quick, easy and you’ll get an instant decision.
Got the green light? Start shopping vehicles today!
2These statements are informational only and should not be construed as legal, accounting or professional advice. Nor are they intended as a substitute for legal or professional guidance. Please consult an independent tax professional for any tax-related questions.
