4 great ways to spend your tax refund on your car
2012 Honda CR-V / Honda
(MoneyWatch) If you are among the happy taxpayers awaiting a refund, you may want to spend it on getting your car in top shape or even as a down payment to buy or lease a new one.
A recent poll showed that one-third of respondents planned to lay out at least part of their expected refunds on their cars. With the average refund this year projected to be around $3,000, what auto allocations make sense?
To justify putting money into your ride instead of, say , investing it, focus on outlays that make your current car safer or more reliable. Or if you are looking at a new car, aim to improve your current gas mileage to cut down on those painful trips to the gas station. Here are four good choices depending on the size of your refund:
1. Do needed maintenance. If your refund is $1,000 or less, putting it toward maintenance or minor repairs you have been ignoring or postponing makes good sense. Concentrate especially on safety-related issues like brakes. You should be able to replace brake pads and rotors on all four wheels for under $500.
If your check-engine light on the dashboard goes on, it could indicate you need to replace your oxygen sensor, an issue that could be hurting your gas mileage by up to 40 percent, according to car repair web site CarMD. Replacing the sensor should cost about $250.
2. Buy new tires. If the tread is worn down, your tires may have trouble gripping well through curves or on wet pavement. Stay with the same specifications of the tires that came with your vehicle. A set of four tires top-rated by Consumer Reports, such as Michelin Energy Saver A/S will cost you around $500.
3. Put a down payment on a new car. If you are shopping for a new car anyway, using a refund of around $2,000 for a down payment can help bring down monthly payments. For instance, $2,000 would be a 9 percent down payment on the $21,782 that Edmunds.com shows as the average selling price for a Ford Fusion SE sedan. That's an improvement over the typical 5 percent down payment and would result in $446 monthly payments on a four year loan at average rates. The Fusion is rated for 22 MPG in city driving and 29 on the highway.
4. Get a good lease deal. If you are getting a bigger $3,000 refund, that could help you tap into a money-saving lease deal if you like leasing. Among the current best lease deals, the newly-redesigned Honda CR-V small SUV is offering a three-year lease at $239 a month if you can put $2,799 down at signing. The CR-V is rated for 23 MPG in city driving and 33 on the highway.
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