If you’re in the market for a new vehicle, then you should know something about tax season: tax refunds and auto financing are a good match.1
That’s because refunds, which averaged about $2,500 last tax season,2 can provide many approved buyers with a ready-made down payment on their next ride, or at least a chunk of it.
That money, in turn, may drop their monthly payment and provide useful savings on interest charges.
A check from the government can be a big plus for lessees, too, for costs such as money due at signing.
But first, let’s take a look at the purchase scenario. In the infographic below, you can see how to use a tax refund to buy a car in six simple steps.
Benefits of using a tax refund to buy or lease
Get a lower monthly payment
A refund of around $2,500 will go a long way toward covering the typical 12 percent down payment on a new car, which has an average price of nearly $41,000, according to Kelley Blue Book. And it will almost cover 12 percent down on the average price of a used vehicle, which is about $22,000, according to Edmunds.
By using Chrysler Capital’s finance calculator, you can work out to what extent this cash may lower a monthly payment. Let’s say you’re interested in buying a new car for $40,000 along with a 60-month financing term, 2.9 percent APR and a trade-in worth $16,000. Entering these details into the calculator, with the trade-in value going into the down payment field, shows that the payment would be $430.3 Add a $2,500 tax refund on top of the trade-in, effectively making a down payment of $18,500, and the monthly payment falls to $385. That results in a saving of $45 each month, and may save you money on interest charges, too.
Pay for upfront lease costs
If you’re looking to lease, then you may wish to use your tax refund to cover money due at signing. This is the amount paid at the time you sign the contract, and includes costs such as the lease down payment (capital cost reduction) and first month’s payment.
Get a head start on payments
Whether you choose to buy or lease, another option is to allocate that money to a number of monthly payments. In our earlier example, a $2,500 check could be used to make six payments of $385 on a five-year note – a significant stretch.
Pay down principal
Alternatively, think about paying down any outstanding balance on your current financing so you can enjoy a stronger position when you trade in. If you’re an existing Chrysler Capital customer, simply log into MyAccount to make an additional payment, or choose from a range of other easy payment options.
Shop the latest deals on FCA US cars, trucks and SUVs
Not only is tax season an opportune time to get a new vehicle, but a variety of incentives is available through Chrysler Capital to sweeten the deal further. Browse the latest purchase and lease offers on Alfa Romeo, Chrysler, Dodge, FIAT®, Ram and Jeep® brand vehicles, locate your nearest dealer, and apply for financing online.
2Based on the IRS’s 2020 tax filing season statistics.
3Not including taxes and fees.