When my husband's 2015 Kia Forte was rear ended, we knew it was time to get a new car. There was just no way to save it. Huge bummer, right? That's what we thought, too. Thankfully, this catastrophe happened during tax season, and we knew we'd be in a comfortable enough position to make a new vehicle investment.
For many families, receiving their tax returns means finally getting the new reliable ride they need, or the speed demon they've been eyeing for awhile. A survey conducted by the National Retail Federation (NRF) stated that more than thirteen (13) percent of Americans plan to spend their tax returns on high budget items, like new vehicles, boats, or homes.
"Many Americans have spent the last few years paying down debt with their tax refunds, but for some, it's the perfect time to buy something nice for a change, " said Phil Rist, executive vice president of Strategic Initiatives, in a release issued by NRF.
Many auto dealerships see a healthy spike in sales between early to mid February, all the way to mid June. The average tax return for Americans is between $2000-$4000, and a substantial down payment is an important factor in securing an auto loan/lease. This is particularly important for potential buyers with less than stellar credit, because this sudden increase in temporary income can create financing opportunities that would otherwise be out of reach.
"A $3000 down payment does a number of things to help a customer with challenged credit," says Paul Scott, a sales manager at a Nissan dealership in California. Higher down payments shows the lender how serious the buyer is about taking on a new loan. It also reduces the likelihood of the buyer becoming upside down during the life of the loan. Additionally, a higher down payment leads to lowering the loan amount, which means a smaller payment to better fit the buyer's budget, which ultimately leads to a higher approval rate.
Opening a car loan with a tax return is a smart decision, but always remember that rules of smart car shopping still apply. You may be faced with better deals during tax season (February - June), but you're still on the hook for the life of the loan. When looking to purchase, be it through a buy here pay here dealership, or through a lender, be sure you've done your research on the dealership/lender, tuck your money away beforehand (don't be so hasty about handing over your entire refund! It sends the wrong message to lenders), bring your valid driver's license, recent pay stubs, a MINIMUM of 4 references, and proof of residence (a utility bill in your name is great!).
Car buying can be stressful, especially when a lump sum falls into your lap, but it doesn't have to be.
At B & L Auto Sales, we do our very best to ensure you're able to drive off with a reasonable down payment, reasonable monthly payment, and a pleasant car buying experience.
We can't wait to help you find the car of your dreams this tax season!
