It’s that time of year again when Americans are rushing to get their taxes filed to see if they get the much-coveted tax return. Tax returns help many families pay off debt and provide a cushion for the rest of the year. But a tax return can also help you with a new car purchase.
Using a Tax Refund has a Positive Effect on Financing
Let’s look at the difference a tax refund might make when you are financing your vehicle. If you
are expecting a $3,000 return, for example, that makes a big difference in covering the standard
12 percent required for a down payment.
As of December 2018, according to Kelley Blue Book, the average price of a new car which was $37,577. If you were interested in purchasing a used vehicle, it would also more than cover 12 percent down. Which according to Edmunds data the average price of a used car was $20,085 in the third quarter of 2018.
Lowers Your Monthly Car Payment
Now, here’s how a down payment like that may reduce your financing costs. Imagine you’re
looking at buying a car for $20,000 and your trade-in is worth $5,000. Using a standard auto
loan calculator, you can see that entering a loan amount of $20,000, with a 60-month loan term,
at 2.9 percent APR, and a down payment of $5,000 results in an estimated monthly payment of
Add in the $3,000 from your tax refund making it a total down payment of $8,000 reducing your
monthly payment to $215 – an additional savings of $54 per month plus you may also save you
money on interest.
Another excellent option for using a tax refund towards a car purchase is allocating the money
for making several monthly payments on the new auto loan instead of a down payment. For
example, a refund of $3,000 could be used to make 11 payments of $269. That is almost a
year’s worth of payments on a five-year loan term — not a bad way to start of your car loan.
Don’t Forget About Car Insurance
When you purchase your new car, don’t forget to factor in car insurance. With the money you
are saving thanks to your tax refund, you could use it to pay ahead on your car insurance. If
you can afford to pay for your insurance six months at a time, you could save on the monthly
Other ways to save on your Illinois car insurance include:
- Shop around
- Choose a safe vehicle
- Pay your monthly payments on time
- Pick a higher deductible
- Ask about any discounts you may qualify for
At Insured ASAP we are here to help you in any way we can. We know Illinois drivers have
unique exposures and our goal is to protect them from all aspects. Contact us today for a non-obligatory car insurance quote today.