Hard-working Americans like yourself look forward to spring for a few reasons: one of them being tax refunds. When it’s time for the money to roll in, you start daydreaming about what to spend it on.
Naturally, because you’re a gearhead, whatever you choose is going to have something to do with cars. But what exactly should your big splurge be this year? Don’t worry—we have a few ideas.
How You Can (and Should) Spend Your Tax Refund
Okay, so you’ve got your tax refund and it’s burning a hole in your pocket. Before you waste your money on something ridiculous, such as a more expansive wardrobe for your cat, check out a few of our car-related purchase suggestions.
1. Make a down payment on a new or used vehicle
Is your old clunker getting clunkier by the day? Then consider putting a down payment on a new or used vehicle. Although auto loans can be a financial burden, constantly patching up an old heap can be equally tough.
The trick is to stay within your budget when shopping for a new car. According to NerdWallet, you should aim to spend less than 10% of your take-home pay on a car payment. Overall, you should dedicate no more than 15% to 20% of your annual income to automotive-related expenses (i.e., payment, insurance, etc.).
In other words — you shouldn’t be shopping for a Ferrari. At least not this year.
2. Fix your current vehicle
Have you been driving around with the check engine light illuminated? Maybe you’ve been ignoring a strange noise coming from your car’s undercarriage? Or perhaps your car bounces a bit too much—indicating a possible issue with your shocks and struts?
Now is the perfect time to kick those bad habits. With a little extra dough from your tax return, you can afford to fix your current vehicle. Doing so will help you avoid buying a new car and taking on an auto loan. Plus, you’ll be rewarding your faithful old ride for years of dependable service.
3. Buy a really inexpensive used vehicle
Having a junker as a second car can be fun. With an old heap, you don’t have to worry about issues, such as door dings, rock chips, and interior stains. Washing a clunker is optional and waxing it, well, that’s out of the question. You can even enter a beater into a race for jalopies, such as the Gambler 500 if you feel so inclined.
Yep, life is more fun when you drive a cheapo-mobile. That’s why buying a really inexpensive car can be a rewarding way to spend your tax refund.
Visit Craigslist (or a similar website) and you’ll find plenty of cars that cost less than $1,000. Scroll through the listings until you find your dream jalopy.
An old Geo Metro or a rusted-out Ford Pinto, perhaps? The possibilities are endless.
4. Pay down an existing car loan
A car loan can be a real bummer — especially once you’re several years in and that “new car smell” is long gone.
So, why not use your tax refund to pay down your existing auto loan?
According to the online lending marketplace, LendingTree, Americans owe more than $1.2 trillion in car loan debt.
Stop being part of that statistic. By putting a little extra money toward paying off your vehicle, you’ll be debt-free much, much sooner.
5. Trick out your ride
Who says you have to be practical with your tax refund? Sometimes, even adults need to have a little fun. Now that you have a couple of extra bucks, you might want to take the opportunity to trick out your ride.
Whether you’ve been pining for a flashy body wrap for your minivan or a massive stereo for your smart car, now’s the time to make it happen. You only live once, so go ahead and fulfill your automotive dreams.
Enjoy the Fruits of Your Labor
You get a tax refund when you pay more to the government than you owe. The refund is your hard-earned cash, despite the fact that it has been in Uncle Sam’s hands. That’s why you should get out and spend your tax refund on whatever your heart desires. Even if that means buying something like, say, an absurdly huge spoiler.
Just have some fun — we won’t judge you.