For many, tax refund will be spent on the car

Tom Staperfenne, 34, isn’t ashamed to admit that he spent most of his family’s federal income tax refund right away.

Nearly the entire $3,700. Gone.

But don’t label Staperfenne as a spendthrift. Most of that money went toward the loan for a 2012 silver Ford Fusion that he bought used last summer for about $8,000.

“I paid it all off in one fell swoop and it was gone,” said Staperfenne, who teaches 10th-grade economics at University Prep Academy High School, a charter school in Detroit.

Sure, many people love to dream about taking a great vacation with a four-figure tax refund or maybe about shopping for something special. But the reality is many of us are plunking tax refund cash back into our cars.

Used car sales even ride on tax refund cash, according to Jonathan Smoke, chief economist for Cox Automotive.

“The peak period for used vehicle sales typically follows when tax refunds have been received by most households,” Smoke said. “We expect the next two months to be the strongest two months of the year for used vehicle sales, given the confluence of an already strong trend combined with the delayed tax refund peak.”

Tax refund cash is the biggest windfall that many families see in a year. On average, taxpayers received $2,893 for federal income tax refunds through March 30, up about 0.5 percent from the same time a year ago, according to IRS statistics.

A $2,500 or $3,000 income tax refund can be a sizable down payment, particularly on a used car.

When it comes to the used car market, one of the most popular vehicles sold in 2017 with a $3,000 down payment was a 2014 Nissan Rouge, according to Dealertrack data.

Putting $3,000 down last year meant an average payment of $327 a month on that vehicle, Smoke said.

Some research indicates that consumers are more inclined to pay down debt and save for necessities or emergencies, like a major car repair.

Kiara Brown, 20, said much of her $1,000 income tax refund went toward fixing her 13-year-old car.

Brown, who works at the General Motors Technical Center in Warren, Mich., providing driving directions for GM’s OnStar customers, recently spent about $700 on some transmission-related expenses for her 2005 Jeep Liberty.

Many consumers appear to be taking a sensible approach to their tax-time riches.

About 49 percent of taxpayers expecting a refund say they’ll put that money into savings, according to the annual tax survey released by the National Retail Federation and Prosper Insights & Analytics.

That’s up from 48 percent last year and the highest level in the 12-year history of the survey. About 35 percent of those surveyed said they’d pay down debt, in line with last year.

About 8 percent said they would make a major purchase ranging from buying a TV or furniture to a car.

Michael Meinke, 29, said he’s saving his $970 federal income tax refund in case his 2006 Mercury Mountaineer needs repairs. “Knowing how life is, you always have to keep it for savings,” Meinke said. “You never know what’s going to happen.”