Rising Car Prices Prompt Tax Refund Reliance
From auto exhibitions to dealership floors, the consensus is clear: new cars are surprisingly pricey these days.
This trend has led more car buyers to depend on their tax refunds.
“It doesn’t hurt,” said buyer Lauren Brausch.
In February, Kelley Blue Book indicated that the average new car price stands at $49,353. With tax refunds increasing this spring, they’re now about 10% higher than last year on average, which helps close the financial gap.
“This offers consumers the support they need to upgrade from less reliable vehicles,” noted Corey Hare, vice president of regional sales at Carmax.
How Tax Refunds Are Influencing Car Purchases
As new car prices rise, used car prices are not escaping the trend either. According to Cox Automotive, the average listing price for a used vehicle was $25,287 in February.
“Dealers are paying more to acquire used vehicles, which inevitably means new owners have to pay a bit more too,” explained Jenny Newman, editor-in-chief at car.com. “Cars are selling quickly, putting pressure on buyers and limiting negotiation leverage.”
However, Haile reassures that there are still affordable used options available, pointing out that “CarMax currently has over 25,000 cars listed under $25,000.”
Timing your purchase can be tricky. Experts suggest it’s best to buy when it feels right for you.
“There’s really no universal best time; it’s a significant investment,” Hare added. “Ultimately, it depends on whether this is the right moment for you.”
Maximizing Your Tax Refund
If you’re in the market for a car and expecting a tax refund, it’s wise to make the most of it.
According to research from Cars.com, about one in three car buyers plan to use their tax returns to purchase a vehicle. Additionally, over one-third are leaning towards American-made cars due to recent tax cuts.
Newman highlighted that many foreign car manufacturers are establishing factories in the U.S. and their vehicles are considered American-made. From 2025 to 2028, taxpayers will also be able to deduct interest on eligible auto loans up to $10,000 annually, given that the vehicle was assembled in the U.S.
For assistance, Newman referred to the Cars.com American Made Index.
While owning a new vehicle has its advantages, don’t overlook used cars. As Hare pointed out, “New cars typically lose value within the first two to four years, so it’s often smarter to let someone else absorb that depreciation.”
- Purchase from trustworthy sources
- Factor in ownership costs like insurance and maintenance
- Negotiate trade-in values
Newman advised consumers to negotiate lower interest rates and be aware of the total costs involved before committing to a purchase.
“Monthly payments matter, but you really should consider how long you’ll be financing and the overall expense,” she stressed.
Some buyers, such as Noah Freed, are choosing to save their refunds for a future purchase, planning to buy in the next year or two. “We’re just putting money aside to build a good safety net. The economy is uncertain,” Freed mentioned.
Experts agree there isn’t a single best time to buy; it really varies according to individual circumstances. Just be sure to do your homework to avoid wasting money.
