How to Use Your Tax Return to Buy a Car

• Tips for using your tax refund to buy a car
• Average tax refund last year was around $3,000
• Upgrading insurance coverage

It’s that time of the year. Like millions of other Americans, you’re doing the hard work and preparing to file your taxes. Once your taxes are submitted, the exciting part begins – possibly turning your refund into a new vehicle for the road ahead.

The average tax refund last year was sizeable – around $3,000 according to the IRS. Whether your tax refund turns out to be more or less than you hoped, there are smart ways to put the money to good use when it comes to your car and auto-related expenses.

Down payment

If getting into a new vehicle is part of your plans for 2026, consider putting down a large down payment. Typically, with a larger down payment, you’ll need to finance less and could possibly end up with smaller monthly payments.

For example, think about a down payment of $3,000 on a $40,000 vehicle. Using our handy monthly payment finance calculator, if you finance for 60 months at 10% interest, your monthly payment would be about $786. But if you are able to double your down payment to $6,000, your monthly payment drops to just over $722 a month. That’s a savings of $64 a month and more than $768 a year!**

Tips for when you use your tax refund to buy a car

Additionally, if you are going to get a new car using your tax refund, keep these tips in mind:

• Knowing your budget. Even though a refund can boost your income when it arrives, it can be spent quickly in a short amount of time. Make sure to consider your current budget to use the extra cash wisely.
• Consider buying a used car. By opening up your ideas of what your next vehicle could be, a pre-owned car could wind up saving you quite a bit of money and make your refund go further regarding auto financing.
• Take your time during the process. It’s always a good idea to weigh options with a vehicle purchase and not rush into something that might be out of budget, or maybe it might not be a good deal after all.

Pay ahead on your current account

Based on your current car loan balance and tax refund amount, you could easily have several months of payments in hand after getting your 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 any accrued interest, you can pay off your loan quicker with these additional payments. For convenience, Santander Consumer USA customers can set up Auto Pay so deductions are automatically made by the payment due date.

Get your account back on track

If you’ve struggled to keep your account paid in full every month, your tax refund could help get you back on track. Popular payment options include the above-mentioned Auto Pay, online and by phone or mail. (Fees apply to debit card payments made by the automated phone system or with a live agent.)

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. Taking a look at your insurance coverage this time of year, resources such as Insurify*** can help you decide ways to save and allocate funds from your tax refund toward insurance costs for the year.

Fix or upgrade your car

Trading in or buying a vehicle right now may not make sense for you. Instead, maybe it’s time to get any dents repaired, or install a new set of tires.

Invest in yourself

If you’re in good shape with your auto loan, insurance, vehicle maintenance, etc., then the time may be right to fill the fuel tank and head out of town for a relaxing road trip. Whether you go on 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 treat yourself and indulge in a nice hotel and fancy restaurant and return feeling refreshed with new memories to share.

*These statements are informational only and should not be construed as legal, financial, tax or other professional advice. Please consult a tax professional for any tax-related questions.

**The referenced calculator and example provided are meant for educational and illustrative purposes only. The calculator estimates monthly payments solely based on the information you provide. We do not guarantee the availability of the illustrated terms or your eligibility for any product referenced. The estimated monthly payments generated from the calculator do not constitute a finance offer.

***Insurance products and services described are offered by Insurify Insurance Agency, Inc., not Santander Consumer USA Inc. or its affiliates. Insurify will help you to arrange your insurance needs with selected insurance carriers. Customers of Santander Consumer USA Inc. are not required to purchase an insurance policy through Insurify or any specific insurance company in connection with their auto loan or lease, and your choice of agent or insurer shall not affect any credit decision or credit terms except as related to the credit worthiness of the insurer and the scope of coverage. Insurify may compensate Santander Insurance Agency US LLC if you sign up for insurance through Insurify. Insurify Insurance Agency, Inc. is a licensed insurance agency in 50 states and DC.