Should You Use Your Tax Refund To Buy a Car?

Everyone has been there. Finances are tight and your car is on its last leg. What do you do in that situation when you just don’t have the extra wiggle room in your budget? Do you go to the bank for a personal loan? Do you ask your family for help? Or do you use your tax refunds on a replacement vehicle? All are valid solutions and they all come with pros and cons, but let’s look at why you should, or shouldn’t, use your tax refund to buy a car.

Are My Finances in Order?

If your finances aren’t usually tight, but you are strapped for cash right now, buying a vehicle with your tax refund may be a viable option for you. You can use the refund to pay for the down payment and/or tax, title, and license on a vehicle or you could outright buy a used vehicle in excellent shape if you’re lucky. With a used vehicle, you wouldn’t have a payment. With a new vehicle, you would have a payment, but if you have that wiggle room in your normal finances then, yes, buy that vehicle.

If you need a vehicle for work, buying a used vehicle with Buy Here Pay Here financing can make it happen.

Do you have tight finances in general throughout the year or are you normally a family that has some in savings? Are you on a paycheck-to-paycheck schedule? If an appliance stopped working and you had to replace it tomorrow would you be able to? The answers to these questions can tell you what you need to know about buying that car.

You may even get lucky and purchase a used vehicle with a warranty. That’s a best-case scenario. Now suppose that you want a new vehicle. If you bought a vehicle for $20,000, you will then have to tax, title, and license that vehicle within 30 days in most cases. A vehicle in that price range could easily cost $2,500 to tax title and license. Is your refund enough to cover that? If it is, great.

If you’d like some advice on Buy Here Pay Here financing from a Buy Here Pay Here dealership that cares about your ability to comfortably repay a loan, consider Auto Now at 79th & Wornall in Kansas City.

Should I Buy a Car or Pay Off Debt with My Tax Refund?

Another thing to consider is debt. Are you currently in debt? Do you carry high balances on your credit cards? Do you have loans out? Are you living paycheck to paycheck with not enough money in each month? If you answered yes to all or most of those then you may want to reconsider your decision to get a vehicle.

Is your vehicle ok? Can it last a bit longer while you pay off debt and build credit? If so, then postponing the purchase of a vehicle and instead using the money to pay off some debt is a better option. You are now improving your debt-to-income ratio, eliminating debt, and raising your credit score at the same time. This not only makes your budget better because your payments on the current debt will be lower, but it will also make you look more favorable in the eyes of the Buy Here Pay Here dealerships in Kansas City you will be speaking with when you do go to purchase a new (or used) vehicle.

If you have a real need for a car or your current car is unlikely to make it through the winter, buying a car with a tax refund would probably be the right move.

Not everyone gets a large tax refund. Individual amounts vary so it’s important to make sure you know what you are working with. In some cases, you may be able to not only pay off debt but also purchase a vehicle. If you are going that route, one recommendation would be to use one third of the refund to purchase the vehicle, one third to pay down debt, and one third to put back into savings just in case. This is especially important for people who sometimes struggle during the year as that savings will allow you to have access to a car payment just in case there is an issue during the year.

For some of the best rates on auto car loans, talk to Buy Here Pay Here used car dealership Auto Now, which has a used car lot at 79th & Wornall in Kansas City and other locations.

Should I Buy a New or Used Vehicle with My Tax Refund?

One last thing – When you go to purchase a new vehicle, if you decide to, you should keep in mind – it’s need not want. If you need a new sedan then get it instead of going for a fancier sports car. If you need a new vehicle stick with what you need even when it’s tempting to go for all the bells and whistles. Different models and even colors carry not only higher price tags but also insurance issues.

Sometimes the forgotten expense of buying a new vehicle is the boost in insurance premiums. This is important to keep in mind when you are calculating the monthly payment of your new vehicle. For instance, suppose your new vehicle has a payment each month of $300, but your insurance is now an extra $65 a month. It’s easier to keep in the mentality that your car payment is $365 so that you are working in that extra insurance premium.

Never jump into a purchase without exploring all of your options. It’s best to see what vehicles are out there and even if you are set on getting a new vehicle look at the used vehicles in your area. You may be pleasantly surprised by the options you find and you may end up saving money while you’re spending it!

Auto Now at 79th & Wornall in Kansas City has a wide range of used cars for sale and tax season is the perfect time to pick up a bargain. Come down and discuss your own financial circumstances with us, and we’ll help you decide whether to use your tax refund for a purchase of a used car.