Ways to Use Your Income Tax Return Toward a New Vehicle

Tax season is right around the corner, and you may be wondering how to use your income tax return toward a new car. Whether you're looking to buy or lease a new Toyota or have your eye on a pre-owned vehicle, there are many ways to use your income tax return for your down payment. It's important to know the value of your trade-in before negotiating or applying for financing, as this can significantly affect the total price of your next auto purchase.

Use Your Tax Refund Toward A Down Payment

If you're buying a new or used vehicle with financing, putting down more money as a down payment will make your monthly payments lower. That's because the amount financed will be less, which makes your monthly loan payment smaller. And since you will be paying less each month, you'll also save money on interest throughout the loan.

Consider Buying a Pre-Owned Vehicle With Your Tax Return

When it comes time to purchase a vehicle, you might want to consider buying one that is pre-owned. It's still smart to look at new cars and make sure they fit into your budget. But considering that a new vehicle can depreciate by 20 percent or more in its first year on the road, it could be a good idea to buy one that has already taken the brunt of its depreciation.

Service Your Existing Vehicle

Service your existing vehicle. This may seem like an obvious route, but it's also often overlooked. If you have a car that needs maintenance, why invest in another one? For starters, your vehicle will last longer and cost less to maintain long-term-and you'll have more money in your pocket for repairs that come up down the road. When it comes to potential mechanical issues with older cars, most people opt for the "out of sight, out of mind" approach. Fortunately, many repairs can be done quickly and inexpensively without purchasing an entirely new vehicle.

Pay Off An Existing Loan

If you have significant debts, such as credit card balances, putting your tax refund toward these balances will help improve your chances of getting approved for an auto loan. Make sure that any debts you pay off are reported as paid in full on your credit reports before applying for a loan. You can ask creditors to report the status change or order copies of your reports from all three major credit reporting agencies.

Hopefully, this guide has provided you with enough helpful information to make a well-informed decision about what you'll be purchasing with your tax return. If you have any questions, please do not hesitate to get in touch with us.