5 Ways to Spend a Stimulus Check on Your Car

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - March 24, 2021

As the most recent round of stimulus checks starts to roll out across the U.S., you may wonder how to best spend extra cash that comes your way. Many Americans spend windfalls of cash on big items like cars. At $1,400 a pop for most qualifying citizens, the latest stimulus check could help you put a down payment on your next vehicle, or pay off the one you have. And these are just two of your options!

Your Stimulus Check and Your Vehicle

How and when you use a chunk of change on your car can depend on a lot of factors. One option is to spend it on your auto loan. Of course, there are plenty of options when it comes to spending a federal stimulus check on your vehicle.

1. An Auto Loan Down Payment

If you own your car free and clear but need another one, an influx of money could be your ticket to a substantial down payment.

When you're starting out an auto loan it's a wise move to put down as much as you can afford to as a down payment. If you're dealing with bad credit, you're typically required to make a down payment of at least $1,000 or 10% of the vehicle's selling price.

Even if you're not required to make a down payment on your car loan, you can save yourself money over the term of your loan if you do. In fact, the more you put down the more options you can open up when it comes to your loan. Adding an extra $1,400 to a down payment you already saved may open up negotiations on different loan terms, a lower interest rate, or a more expensive vehicle to name a few.

2. Pay Off Your Existing Auto Loan

On the other hand, if you haven't paid off your loan, extra cash could help you finish off the payments and remove the lienholder from the loan. If you're near the end of your auto loan you may be able to pay off what you owe. If you're not that close to the end of your loan, but it's time for a different set of wheels, a stimulus check could be used to make the trade-in process easier.

You can typically trade-in a car at any point but it doesn’t put any money toward a down payment unless there's equity in the vehicle. Having equity means that you owe less for your loan than the car is valued at. If you owe more than the value of your vehicle, you must pay off your loan before you can trade it in. If you're in a negative equity position you may be able to use the latest stimulus check to pay off that negative equity and land into an equity position

3. Save Money on Interest Charges

The beginning and end of your loan aren't the only times when a windfall of cash can help you save money. Because most auto loans are simple interest loans, interest accrues daily based on the principal balance of your loan. Therefore, the less you owe, the less there is for interest charges to be racked upon.

Using your stimulus check to pay down the balance of your existing car loan can not only help you own your vehicle sooner, but can also help you avoid paying too much in interest charges. This is especially important for bad credit borrowers who may only qualify for high interest rates. The lower your credit score, the more you're typically charged to borrow money. Making large payments lowers future interest charges and saves you money.

4. Fix Your Car

Adulting may not be the fun choice for how to use your stimulus check, but it certainly goes a long way. If your ride's in need of major repair, now might be the time and a federal stimulus check may be the way.

Buying a new set of tires, scheduling an oil change, replacing brake pads, or even a deluxe car wash to rinse off salt from the winter roads, can all extend the life of your vehicle, too. Regular maintenance like this can help preserve its value which is important when you’re financing.

5. Prep Your Car For Sale

Just because your vehicle isn't in need of any major repairs doesn't mean you can't invest your car. Taking care to have your car cleaned and detailed every once in a while is a good way to keep some value in it. Along with regular maintenance, a clean car is likely to fetch a higher resale price.

If you want to put a little oomph in your vehicle's resale or trade-in price make sure to have dents and dings buffed out, and clean any stains or odors from the interior. It may be a good time to splurge on this car care at a local business – a good spring cleaning for your car and it’s a good way to support local businesses with your stimulus check.

Finding a Dealership

You have some pretty open-ended options when it comes to spending a stimulus check on your vehicle. However, your options for finding a dealership that works with tarnished credit may be limited. Not all dealerships are signed up with lenders that can approve bad credit car loans.

At CarsDirect, we've gathered a nationwide network of special finance dealers over the last two decades that work with credit-challenged consumers. You can start your search for an auto loan by finding a dealership to work with, and we want to connect you to one. Simply fill out our fast, free, zero-obligation car loan request form and we'll get right to work!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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