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Should you Use a Tax Refund as a Down Payment on a Car?

Should you Use a Tax Refund as a Down Payment on a Car?

If you are not sure whether to top up your TFSA or use the tax refund as a down payment on a new car, the down payment may be the best option.


Our Milton auto loans team are going to back up this suggestion with some evidence so stick around with us for a while.


The Canadian car market is experiencing unprecedented growth


There are major market forces at play in the Canadian economy. First, carmakers are transitioning from the internal combustion engine (ICE) to hybrid and all-electric vehicles.


As this shift is taking place, you need to decide on whether to buy a conventional gas-powered car or take the plunge into an EV.


A great middle-of-the-ground option would be going with the Jeep Wrangler 4XE, which is a plug-in hybrid that will give you the reliability of gas and the savings of electric.


In the past, when you bought a new car, it would lose value due to depreciation, but we are seeing cars that are actually increasing in value.


There is a limited number of new cars available in the market, and Canadians put off making a car purchase throughout the pandemic.


All of the buyers that were sitting on the sidelines are now trying to buy a car which means there is more demand than the available supply.


Inflation is driving up labor and raw materials costs that go into the manufacturing of a car, so buyers are trying to purchase a car before prices move.


Interest rates are going up and won’t come down for years to come


Another variable that is fueling demand for cars is the Bank of Canada raising interest rates. One year from now, it will cost you considerably more to finance the purchase of a new car.


Since the start of 2022, interest rates have increased from 0.25% up to 1.0%, which is just in the first quarter of 2022. This may not sound like a large amount, but it impacts the costs of borrowing for all credit-related products in Canada.


As a result, car buyers who are able to lock in a Milton car loan soon will be saving money for the entirety of their car loan.


When you compare the amount of interest you could generate inside a TFSA investing in GICs to what you would be saving with a car loan, the car loan option is more advantageous.


Where to secure the best car loan terms in Milton


Even if your credit is less than ideal, you should jump in and take advantage of this opportunity of using your tax refund as a down payment on a new car. The best source of car loans in Canada is the help of local car dealerships.


These dealerships already know all of the lenders in Canada and can shop around to find the most competitive terms based on your unique financial situation.


The dealership also has credit experts who can show you how to repair your credit so you can get the best financing terms in the future.


As you can see, the market is under extreme pressure, so you need to move fast if you want to get a good deal on a new car.


We’d love to help you find your next car loan. Simply fill in the form below and we’ll get back to you ASAP or see our selection of new and used cars at our Brantford dealership. 


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