Tax season can be a cringe-worthy subject for some and a celebratory time for millions of others. Many taxpayers receive an IRS refund around this time of year, and dealerships everywhere are well aware of this statistic.
A good portion of these taxpayers elect to invest this annual windfall of cash toward car-related purchases, making tax season a fantastic time to buy a used car.
According to IRS statistics, the average refund for the 2021 filing season was over just $3,000. The total sum of tax refunds issued toppled more than $85 billion.
This influx of additional capital always precedes virtually countless sales incentives at used auto dealerships across the country. Most of the promotions start toward the end of tax season after filers pocket their annual refunds.
But the challenge with these past few tax seasons is the state of the current used car market. For many buyers, locating the right used car or truck during this period hasn’t been easy. While many consumers may have the cash down payment in hand, demand has been high while inventory levels remain at all-time lows.
Used vehicle prices have risen sharply in response to the increased demand and the historically low supply. What does this mean for prospective buyers? For starters, those in the used car market often find themselves challenged to locate their vehicle of choice.
And once they encounter the model they’ve been searching for, negotiating a favorable deal on it presents another set of unique obstacles. The good news is most experts predict that the global chip shortage will ease, and what this means for buyers is that used car prices should normalize. Nonetheless, many analysts anticipate several market difficulties to follow the used car sale industry well into 2022.
However, once you arm yourself with the appropriate knowledge and a sound buying strategy, success in your next used car purchase this tax season is almost guaranteed.
Used car prices remain high, but informed buyers are still paying less. Here are three smart tips to keep in mind for getting the best deal when buying a used car or truck this tax season:
1. Understand the Current Used Car Market
The first and most crucial step is to equip yourself with as much knowledge about the used car market as possible. Used vehicle prices aren’t just high; they have been escalating to record levels for over a year now. Accordingly, dealership incentives remain low as well. But that doesn’t mean opportunities don’t exist.
On average, most buyers can still expect to pay below the sticker price on their preferred vehicle. That is because used car dealerships aim to sell the lion’s share of their inventory during tax season so that they can move new vehicles onto their lots.
You’ll quickly discover that most used car dealerships advertise tax season specials. The key is to assess how aggressive these incentives truly are, however.
Is the dealer truly offering an annual special? Or does the offer simply reflect their typical monthly promotion rebranded as a tax season sale?
Good deals tend to stand out. To determine how attractive a dealer incentive is, you must do your homework and use every online shopping tool available.
Be sure to cast a wide net and compare and contrast dealership offers against other used car lots within your market and beyond. Always stay willing to shop outside your local area, even out of state, for the best used car deals.
2. Keep All Options on the Table
If you are shopping for a car in this market, it is likely because you need one. With used car prices up across the board, as much as 35%, according to Car and Driver, keep all your options open. Staying flexible is the best way to ensure the most value out of your next used car purchase.
The limited supply of cars in general means that your car of choice is either unavailable or on offer at an exceedingly high premium. Remember you’re hardly the only one out there shopping for used vehicles. Presuming you’re a savvy buyer who does all the appropriate research, you can count on plenty of other people vying for the exact same model.
Be prepared. You might not encounter your dream car this tax season. The chip shortage and supply chain disruptions have simply prevented new car buyers from trading up. This inevitably translates to less inventory.
While more new cars are starting to come back to ease the overall supply problem, be sure to maintain an open mind as you conduct your search.
As auto distribution returns to normal, expect to find more used cars less than two years old than cars much older than this. Most of these vehicles are coming off lease, and a healthy supply of buyers who purchase new autos every year or every other year still exists.
Upon entering your negotiations on a used car, ask the dealer how long the vehicle has been on the lot. Remember why dealers offer so many exclusive sales incentives during tax season. They want to get rid of last year’s inventory and bring in new cars for the fall.
Use this to your advantage during the negotiation process because it will help you find the best deal on a used car. The vehicle sitting on the lot for several months might not be your first choice. But, if approached correctly, it just might end up being a bargain that you can’t refuse. Stay patient, and be ready to compromise on a car’s features and even the make and model.
3. Take Advantage of Special Financing
If you are concerned about high used-car prices during tax season, rest assured that most dealers offer special in-house financing this time of year to offset the inflated costs. Many tax season financing specials feature attractive down payment options or interest rate incentives to keep your monthly payments low.
Before accepting any finance offer, however, read the fine print carefully. Some incentives may not end up being incentives at all. And if you find the payment lower than expected, stick to your budget plan and don’t be tempted to upgrade to a more expensive model you can’t afford.
Be wary of unnecessary add-ons like warranties and maintenance plans that increase costs. Finding a vendor that honors these service agreements can be challenging.
Finally, always ask your finance advisor several questions before signing on the dotted line. Locating the ideal used car may be exhilarating, but don’t let this influx of emotion allow you to be oversold. This tactic goes a long way to ensure that you receive the best deal possible.
Financing a used car or truck can seem overwhelming, especially as prices are increasing among all sectors of the economy across the board. Most dealerships want to make it simple to finance your car during tax season. It’s a great time to buy a used car.
The Bottom Line
Used car prices are hard to predict, but with an array of incentives and unique financing options, tax season is the perfect time to start shopping for your next used vehicle.
