It is possible to finance new or used car by using your tax refund. In the past few years, it has been found that tax refunds averaged around $3,000 and this amount could be enough for bringing down car financing costs. Besides, it might help you to secure low sustainable monthly payments and accrue savings on interests as well. Thus, you can buy the best new or used vehicle to solve your daily transportation problems. Let us see how to use tax refund for a car purchase.
The amount of tax refund which you receive can be effectively used for paying money upfront in the form of a down payment. Even an average $3,000 amount can mean about 12% down payment which is enough to reduce the amount of money you will borrow for financing your next car. As per Kelly Blue Book, the average price for new cars in December 2019 was around $ 38,948. At the same time, according to Edmunds’s data, the average prices for used cars during the third quarter of 2019 were around $ 20,623.
Down payments from tax refunds can be helpful in lowering car financing costs drastically. If you already have a car, whose market worth is $5,000, you can consider trade-in. By using $3,000 received from tax refund and adding trade-in amount, you can pay $8,000 towards down payment for financing a car worth about $20,000. By qualifying for a low APR of below 3% and choosing a 5 year loan term, your estimated monthly car instalment could around $270 each month. But since, you have used tax refund for a car purchase, the payment works out to be about $215 every month. It implies a $55 saving on instalments plus money saved on interest payments.
Borrowers, who are in urgent need of any type of car financing, require co-signers to obtain early loan approvals. Nevertheless, it is the co-signer’s credit reputation that is at stake as it takes numerous years to build good credit. A couple of missed payments from the borrower can undo all hard work put in by the cosigner. And in the worst situation, it can even make the cosigner qualify for lower interest rates on any kinds of loans in future or get altogether denied for financing.
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