You’re doing the hard work and preparing to file your taxes. Now it’s time to turn your refund into reFUN – on the road.
The average refund last year was sizeable – about $3,200 according to the IRS. Whether your tax refund is or more or less than you hoped, there are smart ways to put the money to good use when it comes to your car and finances.
1. Increase your down payment
A larger car down payment means you’ll need to finance less, and you could end up with smaller monthly payments.
For example, consider a down payment of $3,000 on a $40,000 vehicle. If you finance for 60 months at 10 percent interest, your monthly payment would be about $786. But if you double your down payment to $6,000, your payment shrinks to just over $722 a month. That’s a savings of $64 a month and more than $768 a year!
2. Pay ahead on your current account
Depending on your loan balance and tax refund amount, you could easily have several months of payments in hand after getting your tax refund. Keep this money saved in a secure bank account so you’ll have the funds available when the loan payment is due.
You could even make additional payments. Although you will still be paying interest on those payments, you can pay off your loan quicker. Santander Consumer customers can set up Auto Pay so deductions are automatically made by the payment due date.
3. Get your account back on track
If you’ve struggled to keep your account paid in full every month, you could use your tax refund to get your account current. Popular payment options include Auto Pay, online and by phone or mail. (Fees apply to payments made using a debit card.)
4. Upgrade your insurance coverage
Auto insurance is one of the expensive but necessary aspects to car ownership. Rates can vary depending on a number of factors including location, driving record and vehicle type.
With the average cost of auto insurance expected to be $1,895 annually in 2023, according to Insurify, directing at least a portion of your tax refund to car insurance can be money well spent.
5. Fix or upgrade your car
With inventory rebounding, trading in or buying a vehicle may not make sense for you. Instead, maybe it’s a good time to get the brake job you’ve been putting off or invest in some new tires. If you’re all caught up on maintenance items, consider splurging on that new entertainment system you’ve been dreaming of.
6. Pay off your loan
Depending on the amount of your tax return and how much you owe on your vehicle, you may be able to pay off your loan entirely. Just be sure your loan doesn’t have a prepayment penalty.
Cruising around in a car you own outright is definitely fun!
7. Invest in yourself
If you’re in good shape with your auto loan, insurance, vehicle maintenance, etc., then maybe it’s time to fill the fuel tank and head out of town for a relaxing road trip. Whether a weekend jaunt or something longer, put stress in the rearview mirror and decompress.
Road trips are an excellent way to get creative on a budget. Or splurge a bit and indulge in a luxurious hotel and fancy restaurant and return feeling refreshed.
* These statements are informational suggestions only and should not be construed as legal, accounting or professional advice, nor are they intended as a substitute for legal or professional guidance. Please consult a tax professional.