Tax season is when you can expect car dealers to blast the airwaves with ads that feature deals enticing you to spend your tax refund on a car purchase. Of course, many people don’t need encouragement when it comes to spending their refund. A study from 2018 determined that 92% of Americans planned to file their income taxes as early as possible and receive their refunds on or before the April 15 deadline.
Is Your Income Tax Refund Enough to Put a Down Payment on a Used Car?
On average, taxpayers get refund of about $3,000. While you may think this is found money, it’s not; it is what you overpaid to the IRS. Most Americans don’t add tax refunds into their monthly budgets; many view the refund as a bonus to go on a shopping spree.
If you anticipate a refund this year, why not use it on something worthwhile, such as a used car, that will extend its value? If you don’t think you can afford even a used car due to credit issues, know that putting down a sizeable down payment for the purchase of a car can open up more financing opportunities for you. According to Ronald Montoya, a consumer advice editor for Edmunds, those having a credit score of 620 or under would benefit from a larger down payment as it could increase their chances of receiving a loan.
Montoya also states that the average down payment for a car is anywhere from 10 to 20%, with a current average of nearly 12% of the car’s selling price. For instance, if you should choose to purchase a certified preowned car costing about $15,000, you could put 20% down with a $3,000 tax refund. At a $27,272 vehicle price, you could still put 11% down. So, an average tax refund will be enough to put a down payment on a used car.
Why Use Your Income Tax Refund on a Car?
One big reason is that you will not have to compromise your household budget. Many people, unfortunately, find themselves living paycheck to paycheck with very little left over to save for things they really need. With a good-sized tax refund, you’ll have some extra money, outside of your budget, to use on something like a used car purchase. If you are fortunate enough to have a savings account, your tax refund may be the final piece you need to get the car of your dreams.
You have another option available to you. If you’re a taxpayer who earned less income than the year before or you have an investment income below $3,650, you may qualify for an Earned Income Tax Credit. If you are eligible, it may raise the amount of your tax refund, meaning that you could end up with a refund of more than the average of $3,000. This is a big deal when you’re looking to purchase a car and you don’t have much, or any, savings.
Most Economical Used Cars
2017 Kia Niro
The Kia Niro is an excellent choice in the hybrid and electric SUV class. According to the U.S. Department of Energy, the Niro FE model is quite economical, with a fuel efficiency of 50 mpg combined in city and highway travel. The Niro FE provides a $3,000 fuel savings over a five-year period. The Niro has an audio and navigation system that is easy to use to get you from place to place. The 1.6-liter, four-cylinder electric motor generates 139 horsepower, slightly higher than average for a vehicle of its class.
The Niro FE further distinguishes itself by using a six-speed, dual-clutch automatic transmission in place of the more standard continuously variable transmission (CVT), giving it a quick and smooth shifting experience. Latch anchors are tucked away between the cushions where the rear seatbacks fold down, providing added safety to your precious cargo. Overall, the Kia Niro is fun to drive and responsive even at highway speeds.
2019 Toyota Prius Prime
The Toyota Prius Prime feels somewhat like a regular Prius in terms of the ride and offers high priority over dynamic capability efficiency. In Edmunds’ economical testing, the Prius Prime EV range is 25 miles with a combined fuel economy estimate an impressive 54 mpg. It offers a four-seat capacity with less cargo space than the standard Prius, but it has a unique style and is a bit more affordable. The Toyota Prius Prime is accessible in three different levels: Plus, Premium, and Advanced. The hybrid powertrain and performance are the same for all three levels, leaving only their features to showcase their differences.
All trims come with a 1.8-liter, four-cylinder engine paired to a plug-in hybrid system with an output of 121 horsepower. The seats are ergonomically designed with some give that conforms to your body structure, making it perfect for long rides. The Prius Prime offers blind-spot monitoring, a rear cross-traffic alert, and a lane departure warning system.
2019 Honda Clarity
The 2019 Honda Clarity model is offered in three distinctive versions: fuel cell, electric, and plug-in hybrid. The Clarity plug-in hybrid has a 1.5-liter, four-cylinder gas engine paired to an electric motor hybrid system, totaling 212 horsepower with 232 pound-feet of torque. The electric-only range will take you about 48 miles, and the fuel economy for regular hybrid operation is about 42 mpg. The Clarity electric motor has 161 horsepower and has an EPA-estimated electric range of 89 miles.
The Clarity fuel cell trim is power-driven by an electric motor that offers 174 horsepower fed by a fuel cell. It features rear-mounted tanks that hold an adequate amount of compressed hydrogen for an EPA-estimated 366 miles of emission-free driving. The performance of the Clarity is comfortable on smooth roads, and the car accelerates efficiently.
2018 Ford Fusion
Ford offers two hybrid models, the Fusion Hybrid and Fusion Hybrid Energi plug-in model. Both models require a battery to run the motor, but there’s some difference between the two. The Fusion Hybrid has a 1.4 kWh lithium-ion battery that supplies the motor with electricity; it’s charged through braking and partly using the gasoline engine. The Fusion Hybrid Energi has a more powerful battery of 7.6 kWh; it can be charged with a 120-volt charging cord.
You’ll get more electrical assistance with the Ford Fusion Energi. It can hold its own with 21 miles of electric-only driving range and a gas engine that has a 610-mile range. The Fusion Energi provides a combined fuel economy estimate of 42 mpg. The Ford Fusion has a spacious and well-trimmed cabin, enjoyable driving dynamics, advanced safety features, and user-friendly technology. The Fusion also offers a self-parking system and a driver assist safety feature.
Now that you’ve learned all the best ways to utilize your tax refund for a used vehicle, it’s time to take action and choose the best economical car that suits your family’s budget and needs.