As tax refunds begin to reach the bank accounts of Tennesseans, many people may use the proceeds to purchase a new or used automobile.
Moreover, the thrill of purchasing a vehicle can rapidly turn sour if you fall prey to unscrupulous auto con artists.
How To Use Tax Refunds To Pay For A Car?
The Tennessee Motor Vehicle Commission, which falls under the Division of Regulatory Boards of the Tennessee Department of Commerce & Insurance, encourages consumers to be vigilant, complete research before purchasing a car, and always employ licensed sales professionals.
There are several ways to finance a tax return automobile purchase. Choose which option is best for you and your wallet based on your current financial circumstances.
Reduce your present debt or purchase your lease
Paying off your current debt can be a prudent financial move, despite the fact that you will no longer smell like a brand-new car. Utilize your tax refund to make a few extra payments or to settle the balance in full. Check the fine print of your loan agreement to prevent any early payment costs before you use your refund to pay down your loan.
Be aware that towards the conclusion of your loan, you will often no longer be required to pay interest. If you are in this situation, it may make financial sense to apply your tax refund to debts with a higher interest rate, such as a school loan or credit card bill.
Make a down payment on a vehicle
The larger your vehicle’s down payment, the cheaper your monthly payment and the less interest you will pay over time.
Experts recommend paying 20% of the car’s value as a down payment, so using your tax refund to make a sizable down payment on a vehicle is a fantastic method to reduce your total cost.
A down payment calculator will assist you in determining how much you can save. If your tax refund is insufficient to cover the entire 20% down payment, you should still use your trade-in and savings to make up the difference.
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Lease a new vehicle
Those who desire to drive a newer, fancier vehicle might do it at a reduced cost by leasing as opposed to purchasing.
If you have additional money available, you can make a larger down payment on the vehicle to minimize your monthly payment. Putting a down payment on a leased vehicle is typically not advised unless you need to reduce the monthly payment.
If you make a down payment, the overall cost of leasing does not change, and if the vehicle is totaled, you will lose that money.
As an alternative to utilizing your tax return as a down payment, you may save the funds in a savings account and use them to cover a few months’ worth of future rent payments if finances get tight.
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