Should I Use my Tax Refund to Pay Off Car Loan?

By Product Expert | Posted in Financing, Used Inventory on Wednesday, February 15th, 2017 at 4:35 pm
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Debt is a scary thing, and while it’s basically unavoidable if you choose to go to college, there are those of us who choose to take on some debt when buying a car. The choice between something newer and more reliable, and something easier on the wallet is tough enough as it is. When it comes to tax refund season, many of us are considering what to do with the money. Read on for tips and info about the best way to use your tax refund in 2017.  

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Using Tax Refund to Pay Off Car Loan

Many of us are paying off a financing plan on a car every month. So, you get a chunk of change back this year after doing your taxes, why not just throw all the money at the loan? We’ve got a few things you might want to consider first:

  • Do you have other debt with a higher interest rate, such as credit cards, that would be better to pay off more quickly?
  • Could you invest the money elsewhere and get a higher return on investment than your car loan is costing you to pay monthly?
  • Do you plan on selling the vehicle soon? It’s better, in most cases, to have the vehicle paid off before selling or trading-in for your next one.

Using Your Tax Refund to Buy a Car

If you’ve got the money burning a hole in your pocket, and you’re unsure whether it’s time to trade-in or buy something new, we’ve got a few tips. First, you’ll want to decide between financing something new, and using your tax refund as a nice down-payment, or buying something previously-owned.

  • Buying a new vehicle often means enjoying the latest in high-tech convenience and comfort, but comes at a higher price, and usually includes a financing plan. Remember when choosing a new vehicle and putting your tax refund down, that you’ll still need to be able to afford the monthly financing payments.
  • Buying a used vehicle can be risky, especially if you don’t know what to look for. Be sure to have an experienced professional inspect any used vehicle before you put your money on the table, and take time to consider what the depreciation rate is for the vehicle you’ve chosen. A car with a lower depreciation rate will be worth more when you go to sell or trade-in down the road.
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