5 Reasons Why Tax Season Is a Good Time to Buy a Car
As the snow melts away and tulips begin blooming, another season arrives.
With an average tax return in Canada just shy of $1,900, tax season gives Canadians an opportunity to put some extra money to good use. For car shoppers, that might mean finally pulling the trigger on a much-needed vehicle purchase.
But what makes tax season the right time to buy a car?
Here are five reasons why this time of year might be your best opportunity to start looking for your new ride.
Read more: 7 Ways to Get a Bigger Tax Return
1. New & used inventories are growing
During the early stages of the pandemic, car dealerships were running short on inventory due to manufacturing shutdowns and auction closures. The shortages led to an increase in car prices that lasted for months. With manufacturing restored and the car business moving at its usual paces again, inventory levels are coming back to normal for both new and used cars.
The timing happens to coincide perfectly with tax season. With stabilized pricing and your tax return in hand, you can get a good deal on a car that might’ve been previously hard to find.
2. Pay off debts
Financially, it makes good sense to use your tax return to pay down any high-interest debt you’re carrying. Furthermore, paying off any outstanding debts could potentially help you secure a better car deal this year.
Your debt-to-income (DTI) ratio refers to how much of your income is committed to ongoing payments such as your mortgage or rent, credit cards, existing car loans, etc. For the lender, it is a cause for concern if your debt-to-income percentage is over 43%.
Paying the balance on a high-interest credit card could get your DTI under 43% and help you get approved for a higher amount and/or lower interest rate on your next loan. Incidentally, by paying off credit card debt, you’ll reduce your credit utilization, which can raise your credit score and boost your eligibility for better rates.
3. Great deals through summer
If you’re determined to buy a brand new car, carmakers still have aggressive promotions going on to make up for the COVID downtime. Interest rates can be found as low as 0% for up to 96 months from certain manufacturers. Furthermore, if you wait until summer, that’s when Employee Pricing promotions start cropping up.
More promotions on brand new cars during the spring and summer months mean better deals on pre-owned cars too because it puts more trade-ins into the market. This creates a higher supply and a better selection of used vehicles.
4. Better trim or model
Rather than buying the base model that you otherwise would have settled for, adding the money from your tax return means you might be able to afford the trim level you really wanted.
Spending a little bit more can be a good financial investment too. For example, if you’re looking at pre-owned cars, you might be able to spring for that newer model with the lower mileage, cleaner history report, and overall better resale value potential.
5. Down payment or no down payment?
If you’re hoping to finance your car purchase, remember that any money you put down upfront reduces the overall amount you need to borrow and helps both lower your monthly payment and the total amount of interest (the cost of financing) that you’ll pay on the loan.
Traditionally, a down payment can increase your chances of getting approved in the first place, especially if you’re trying to get financed with bad credit or no credit. The lender typically looks at a down payment positively as it lowers their level of risk.
On the other hand, more lenders are willing to work with customers even if they have bad credit and zero down car loans are a popular choice with Canadian car buyers today.
Money down or no money down, Canada Drives can connect you with the best car deals online.
We make car shopping easy. Click here to get started today!