Stimulus checks sent out by the government as part of the $2 trillion economic package are already hitting mailboxes and bank accounts. This much-needed cash at a time of economic uncertainty is welcome and what you do with it depends on your circumstance. Should you use this government money to help buy a new or used car? Here are a few do’s and don’ts of how to apply these funds.
How much will I get?
First a few basics. If you’re an individual making less than $75,000 per year, you receive $1,200. Married couples filing jointly get $2,400 up to $150,000 in income. An additional $500 is added per child. The money phases out at income levels exceeding $99,000 for individuals and $198,000 for married couples.
Should I buy a car with my stimulus check?
If you plan to buy a new or used car and your employment is secure, by all means, use the money to help with the down payment. The more you put down on the car, the less you’ll owe not only in principle but also costly interest over the life of the loan.
Consider using the money for other costs associated with the deal. You may only want to put a portion of the stimulus money down on the car and save some of it to pay associated costs, like sales tax or the first insurance payment.
Depending on the amount of money you’re getting, which can be $3,400 for a family of four, and your financial situation, you might consider buying a used vehicle, where that kind of money will go much further and could even purchase an entire vehicle.
Should I not use the stimulus check to buy a car?
If you lose your job or your employment picture is uncertain, postpone the idea of buying a new or used vehicle. Use the money for more immediate needs like car or rent payments. This money is there to help tide you over until the economy improves.
For those planning on going ahead with that new or used vehicle purchase, resist the temptation to buy a more expensive vehicle. While a larger or more feature-laden car or truck will be more tempting, it will only cost you more in the long run. This is especially true on a longer loan designed to keep payments affordable. You’ll pay more interest in the long run.
Also, don’t plan on this being a recurring event. Keep in mind this is a one-time payment only. If you’re planning on another installment to help swing a deal, then you’re courting financial disaster.
More: Is Now the Time to Buy, Sell, or Trade a Used Car?
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