With the average American tax return at around $3,000 in 2020, tax season is an ideal time to purchase a new vehicle. The tax refund offers an influx of funds each year that provide the perfect opportunity if you’re looking to get into a new (or used) set of wheels.

In addition to your annual income tax refund, the federal government issued three economic impact payments to eligible recipients due to the COVID-19 pandemic. The first check for $1,200 went out in early 2020, the second, which was for $600, was distributed late in 2020, and the third check for $1,400 was sent out starting in mid-March of 2021. If you were able to save these funds, then your available amount for a down payment could be as high as several thousand dollars.

If you use your combined tax refund and economic stimulus funds toward a substantial down payment on a car or SUV, you could easily lower your monthly payment and significantly reduce the overall amount you need to finance. These extra dollars could not only make your car or SUV purchase more affordable, but it could allow you to choose a higher trim level or even consider another make and model that you had previously decided was beyond your budget. So, if tax refund time finds you ready to go car shopping, here are some helpful tips you should keep in mind.

First, you should determine whether or not your budget and your life circumstances make buying a new or used vehicle  appropriate. If your budget can handle the  price of a new vehicle and all of the additional costs that go along with it, then consider a new car. If your budget is not quite ready for the price tag of a new car, then many dealerships, like World Car Kia North and its affiliates, offer a wide selection of pre-owned vehicles at affordable prices. World Car even has a certified pre-owned inventory that offers benefits like limited warranties, roadside assistance and rental car reimbursement. Once you determine what type of car is best for your budgetary and driving situation, then it’s time to look at your financing options.

When purchasing a car, you have the option of direct lending or dealership financing to pay for the car. With both options, you will pay, over time, the amount financed plus a finance charge. With direct lending, the loan comes directly from a bank, finance company or credit union. With direct lending, you can comparison shop to different lenders and discover the various credit terms available. You can also know your credit terms in advance of purchasing your car. With dealership financing, you obviously get financing through the dealership but the dealership often sells the contract to a bank, finance company, or credit union that services the account and collects payments. The benefits of dealership financing include the convenience, multiple financing options and often, specials that offer incentives for buyers. Whatever method you choose, be sure you negotiated the best price for your vehicle and your financing terms. Thanks to your larger down payment due to your tax refund, even if your credit is not so stellar, your down payment could really help lower your monthly payments and the overall amount you will pay for your new or used car and help you get approved.

If you decide to use your tax refund for a down payment on a new or used vehicle, remember it’s always important not to rush into your purchase and always comparison shop for the best car and best price that fits your budget. Don’t forget to ask about any specials on the cars you’re looking at and consider using just a portion of your tax refund if that will get you to the price you want on your car. Whatever the case, new or used car, and whatever type of financing, just remember that you’re going into the situation armed with cash for a bigger down payment and with that, you’re already a step ahead in the car-buying process.