Cars Blog

Finance Blogs » Cars Blog » Don’t buy used car with tax refund

Don’t buy used car with tax refund

By Tara Baukus Mello ·
Tuesday, April 15, 2014
Posted: 4 pm ET

If you are one of the lucky Americans who is getting a tax refund this year, you already may have that money pegged for a special purpose. If you were thinking about using your tax refund to buy a car, you might want to rethink that -- at least in the short term. Research from Black Book, a used-car valuation guide, has looked at the historical data and found that used car prices are higher in the spring and decline in the summer, making it smart for consumers to hold off on using their tax refunds to buy a car for at least a few months.

In assessing five popular car segments, Black Book found that the average prices for used cars in all of them declined between April and July. For last year, it noted the following price drops during that time period:

  • Entry-level, midsize car: 5.9 percent.
  • Full-size car: 4.2 percent.
  • Full-size crossover: 3.6 percent.
  • Upper mid-size car: 3.5 percent.
  • Compact car: 3.4 percent.

Even if you opt to hold off on buying a used car for a few months, now is a great time to start your research to ensure you are happy with your choice and get a good price. Read 10 tips for buying the right car in 2014 to help you get started. 

Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
April 20, 2014 at 6:40 pm

life sucs over piced new cars and trucks and use autos too!

Jerry Graham
April 20, 2014 at 4:38 pm

Now or later, There isn't any better time provided you know how to shop or use services I provide. I am a Personal Vehicle Shopper. I first and foremost Listen, then with all the necessary information, including what's most important, the color, features, and budget I shop, bring the perfect vehicle out for a demo, and if it is perfect, then we go in and do the final paperwork in about 30 minutes to an hour. New or used doing the research and knowing who to talk to with a history in the field makes it a whole lot easier. Now or later you can still end up in a win position.

April 20, 2014 at 3:45 pm

Ya I think I will have to call bs on this one, I used to sell cars and trucks and spring summer means more sales and the price moves up slightly. I think Black Book is full of it. I also agree with another poster on not buying a new car, let someone else take the hit of depreciation.

Richard Maughn
April 20, 2014 at 1:38 pm

I'm looking for a plug-in hybrid, or, even better, an all- electric car. For me the pros of an all-electric outweigh the cons. I rarely drive more than 40 or 50 miles in a day, so the shorter range of an electric isn't a problem. I'll save money on maintenance, and mile for mile, the electric bill to charge the batteries will be a lot cheaper than what I'd pay for gasoline.

April 20, 2014 at 1:04 pm

I mostly agree with Robert. I have 2 work vehicles to sell this spring and I am interested in the purchase of one myself. Due to many reasons, especially the bad weather, I have waited to clean and prepare the vehicles for sale. I suspect many others are in the same situation as well. This should dump a lot of choices on the market right now. There are so many other factors that affect the prices, like the cost of fuel and the overall economy. I also wonder if the cash for clunkers has some lingering effect on the used car market still today. How many people can wait months and months anyway. Just educate yourself on price and go for it.

J Sim
April 20, 2014 at 1:02 pm

I was going to purchase a used rental car from Enterprise car sales. They had a Nissan Versa sedan 2013 with 30k miles. Checked it out. It was not the color that my daughter wanted, but everything else fit the bill. Until I did some research. I researched the price of a new 2014 equipped the same way in the color my daughter wanted. The price on the new one was the same as enterprise on a used one. No brainer...We went for the new one. Enterprise would not budge on their price.

Dave Wooldridge
April 20, 2014 at 12:53 pm

As long as you are willing, or need to buy a vehicle, why buy used? History might not always be correct, and any savings from buying used get eaten up when repairs happen, while at least for the first 3 yrs or so, a full mfg. warranty covers most everything except stupidity. How long would it be before you need to start buying stuff like tires, or ordinary wear items?

April 16, 2014 at 8:51 pm

I sure as Heck wouldn't purchase a new vehicle !

April 16, 2014 at 8:27 pm

A dip of 3.4- 5.9% as detailed for a 3-4 month time frame is not extroidinary as most used cars (depending on how old it is) depreciates at least 1-1.5% per month anyway.

April 16, 2014 at 7:49 pm

Please don't listen to this terrible advice! I am a salesperson in the suburbs of Philadelphia-this winter was terrible for my business and I am now looking forward to the warmer weather to again sell some cars. The spring is a great time to buy, dealers and private sellers are eager to move their vehicles and the prices are competitive due to the nature of the economic picture here. Waiting will only prevent you from finding the best car NOW!