Many people plan for a big purchase when they get their income tax refund. If you're looking to buy a new or used car with your tax refund, how do you go about doing it? Here are the steps you need to take:
Step 1: Filing Your Taxes
Your W-2 form is your official wage and tax statement that's prepared by your employer and sent to you and the Internal Revenue Service (IRS). Your W-2 lists your annual wages from the prior year, the amount of taxes withheld on those earnings, and more.
As an employee, you need your W-2 statement when filing your income tax return.
All of the information on it determines whether or not you're going to get a tax refund, and if you owe more in taxes.
You can file your taxes yourself electronically or by mail. To get your tax refund as fast and securely as possible, the IRS recommends that you file electronically and choose to receive your refund by direct deposit.
Step 2: Researching Vehicles and Budgeting
If you have a refund on the way and want to buy a vehicle, you should start looking into your options while you wait. You have a lot to figure out: whether you should buy new or used, what you need in a car, what you can afford to spend, and more. While it's exciting to get your refund, you don't want to rush things when it comes to a purchase this big.
Regardless of if you choose a new or used vehicle, it helps to read reviews from experts and previous owners. Check out equipment, fuel economy, safety ratings reliability, price, and anything else that's important to you when weighing your options.
You should also take a close look at what you make each month compared to what you spend to map out a car buying budget. You can use online tools like our Car Loan Estimator and Payment Calculator to help. Be aware that our calculators don’t include taxes and fees, so make sure you budget for those, too.
Step 3: Finding Auto Financing
Once you have an idea on what you’re looking for and have your tax refund, you can begin shopping for an auto loan. You can try to get financed with your personal bank or credit union, online lenders, or the finance department of a dealership.
A good tip is to rate shop, where you apply with multiple lenders in a short period of time to see which can offer the best interest rate. Rate shopping doesn't have to torpedo your credit score, either. All hard inquiries made for the same type of credit in a given time frame (typically 14 days, but this varies by credit bureau) only count against your credit score as one single hard inquiry.
If you have bad credit and want to use your tax refund as a down payment on a vehicle, you may find it difficult to rate shop. Traditional lenders generally aren’t going to approve you if your credit isn’t good, but there are subprime lenders that specialize in working with consumers with bad credit – and we know where to find them.
Let Auto Credit Express Help Connect You
Don’t feel down if you're struggling to get financed with bad credit. Auto Credit Express can help set you up with a dealer near you so you can use your tax refund on your next car.
Auto Credit Express has been helping consumers get connected to special finance dealerships across the US for 20 years. Getting started is a breeze. We'll get right to work matching you with a local dealer after you complete our free and secure auto loan request form.