Tax Refund or Stimulus Check? Here’s How to Shop Wisely for a Car

Few phrases spark as much instant joy as “tax refund,” and some Americans in 2021 will be able to pair their tax refund excitement with another happy phrase: “stimulus check.” For many, this windfall could be the final piece needed to move forward in purchasing a new or used car. 

Related: Cars.com Data, Survey Shows Pandemic Spurred Car Buying

They won’t be alone: A Cars.com survey of 633 in-market shoppers in March 2021 found that 27% plan to use their income-tax refund to help buy a car this year. That’s a significant increase from a year ago, in the early weeks of the COVID-19 pandemic, when just 21% of in-market shoppers indicated plans to use their tax return to help buy their car. 

A lot has changed in this marathon year of pandemic life, including car shopping. New and used cars are selling faster than in pre-pandemic times, and for higher average prices, but car shopping from home has become easier thanks to new digital tools. 

If You’re Ready to Buy, Don’t Delay

If you’re heading out to shop for cars, you may have a harder time finding the exact model you’ve been dreaming about. Automakers’ supply chains, including those for critical microchips, have been hit hard by the pandemic. That keeps manufacturers from building as many cars as they normally would. 

If you see the car you want, that means you’ll need to move — fast. Cars.com data found that compared to pre-pandemic times, average prices for new vehicles increased 4.8% year over year during the pandemic. And these cars listed on Cars.com sold a whopping 22 days faster than during the Before Times. 

Think you can just shop for a used car? Not so fast. Cars.com data found that average used-car prices rose 9.7% year over year, with used vehicles selling five days faster than before the pandemic hit. 

This isn’t a great market for car shoppers, and if you can wait to buy, you should consider it. For those who can’t wait, you’ll need a game plan.

When looking at Cars.com’s listings for a specific car, you’ll want to check how many are available in your area. If there are a lot for sale, there’s no reason to feel like you need to move fast. If the opposite is true — there aren’t a lot of vehicles available, or you see inventory shrinking notably within a short period of time — widen your search area to see if the number increases substantially. If it doesn’t, it’s time to contact a dealer and get moving on a test drive and negotiations. And one more thing: For cars in short supply, don’t hold out waiting for automaker incentives to sweeten the deal. Less inventory usually means automakers won’t be offering deals to help move the metal.

You’re Still Looking for a Deal

By now, you should be coming to terms with the idea that car prices have increased and incentives have decreased, but that doesn’t mean shoppers can’t find a good value. 

One vehicle that exemplifies value is the 2021 Hyundai Venue, winner of the Cars.com Best Value of 2021 award. The Venue’s base trim level, called the SE, has an automatic transmission, keyless entry and an 8-inch touchscreen with Apple CarPlay and Android Auto. This small, SUV-like hatchback doesn’t skimp on safety features, either: The Venue SE also has automatic emergency braking with pedestrian detection and lane departure steering assist for a starting price of $19,935, including a destination fee.

Even with the inventory squeeze, you might be able to find a deal on a sedan. SUVs and pickup trucks remain the strongest sellers, leaving some sedans to languish on dealer lots. Sedans are cheaper than their same-sized SUV counterparts, with Cars.com data from late 2020 showing that the median list price for a new SUV on Cars.com was around $7,500 more than that of a new car. They also tend to be more fuel-efficient than SUVs, so your total ownership costs will be lower too. 

Now we have your attention. Well, if you’re willing to get serious about sedans, consider the compact class. Our analysis of which compact sedan has the most bang for the buck will give you some great cars to consider.  

Car Shopping in a Pandemic and Beyond

Car shopping has changed for the better. Many dealerships have moved critical parts of the process online. At Cars.com, you’ll find badging that identifies dealerships that offer virtual appointments and at-home delivery. And you can negotiate via online chat, email or text messages — all from the safety of your home. 

So, file that tax return before the May 17th deadline, get your sweet tax refund and spend wisely. 

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