From auto shows to dealer showrooms, one message is loud and clear: new cars are shockingly expensive. That has more car buyers leaning on tax refunds for help.
"It doesn't hurt," said shopper Lauren Brausch.
In February, Kelley Blue Book reported new vehicle prices averaged $49,353.
This spring, higher tax refunds are helping to close the gap, with the average refund about 10% higher than last year.
"That can really give consumers the financial boosts that they need to replace that vehicle that's not reliable anymore," said Corey Haire, vice president of regional sales for CarMax.
Watch as car buyers and experts talk about using your tax refund toward a new car:
What to expect shopping for cars this spring
When new car prices climb, used car prices follow. The average listing price for used vehicles in February was $25,287, according to Cox Automotive.
RELATED STORY | New car prices hit historic high as average cost surpasses $50,000 for first time
"Dealers are having to pay more to acquire those used car vehicles, which means that the price that the new owner will pay is also going to be a little higher," said Jenni Newman, editor-in-chief of Cars.com. "The cars are moving quickly off the lot. That also adds a level of pressure for shoppers and also less room for negotiation."
Before shoppers get discouraged, Haire said there are plenty of affordable used vehicles still on the market.
"We've got more than 25,000 cars available across CarMax that are actually under $25,000," she said.
As far as timing goes, there's no way to predict when prices will rise or fall. Experts say to time a purchase when it's right for you.
"There really is no universal best time. It is a big investment," Haire said. "It's really about, is it the best time for you personally as a consumer."
How far a tax refund can go
If you need a car and are receiving a tax refund, you certainly want to make the most of it.
A Cars.com survey found one in three active car buyers plan to use their tax return toward a new vehicle purchase.
More than a third indicate that recent tax deductions have incentivized them to look at American-made vehicles.
"The truth is, there are a lot of foreign automakers who have built plants here in the U.S. and their cars are American-made," Newman said.
Effective 2025 through 2028, taxpayers can deduct eligible car loan interest, up to $10,000 annually. The vehicle must have undergone final assembly in the U.S.
Newman points to Cars.com's American-Made Index for help.
"You can see the 99 vehicles that were built in the U.S. in 2025," she said.
RELATED STORY | Gas at $3.53 a gallon: Are EVs more affordable?
While there are perks to owning a new car, don't rule out a used vehicle.
"A new car is going to depreciate, usually in the first two to four years. So let somebody else pay for that depreciation," Haire said.
For savings, Haire also recommends:
- Buying from a trusted organization
- Accounting for car ownership costs such as insurance and maintenance
- Negotiating more money for your trade-in
Newman urges consumers to negotiate a lower interest rate and understand the total cost of the vehicle before you buy.
"Monthly payment is really important, but you really need to think about the length of the loan or how long you'll be making those payments and, ultimately, how much you're paying," she said.
Some buyers, like Noah Freed, plan to save their refund, hoping to make a car purchase in the next year or two.
"We're just putting money away, making sure we have a nice nest egg. You never know what's going to happen with the economy," Freed said.
Experts say there is no single best time to buy. It all depends on individual needs.
However, know what you're walking into, so you don’t waste your money.
___________________________________
"Don't Waste Your Money" is a registered trademark of Scripps Media, Inc. ("Scripps").
Follow John:
- Facebook: John Matarese Money
- Instagram: @johnmataresemoney
- X/Twitter: @JohnMatarese
For more consumer news and money saving advice, go to www.dontwasteyourmoney.com
