Can you deduct your car on your taxes?

As a car company, we often get customers asking us, “Can you deduct your car on your taxes?They’re not alone: Americans everywhere are starting to think through their finances as tax season approaches. But most people don’t know all the ways that their cars can have an impact on their returns, or vice versa. We’ve rounded up some of the best tips you need to know to maximize your money. 

Your taxes and your [next] car

Perhaps the most obvious way to get the most out of tax season is if you receive a refund from the government after filing your return. The average American receives about $2,900 back on their annual tax refund. Compare that to the average used car price of about $20,000, and an average 12 percent down payment of $2,400. So it’s easy to see how that extra cash windfall can literally pay for a new set of wheels. It’s no wonder why TurboTax lists replacing your car as one of the best ways to spend your tax refund. Some people also use that cash to pay for service or upgrades to their current vehicle. 

One of the hidden benefits to putting a tax return towards a car’s down payment is that you can generally either afford a more expensive car (a higher-value asset). Alternatively, you can apply more money towards the down payment, which can lower your overall loan amount and APR. Keep in mind that high-quality used cars tend to retain their value better than brand new cars, so your money will go farther if you choose to buy used. 

Moreover, if you purchased or used a car for professional purposes (for example, a van for your catering business), you can also write that off on your taxes. Here’s a full rundown of the tax considerations for business vehicles.

Other Ways to Use Your Car on Your Taxes

Even if you don’t have a refund coming your way, you can still take advantage of some vehicle-related benefits come tax season.  You can deduct sales tax on a car purchase for local and state taxes when you itemize your deductions. (Given the large price tag of a new car, that’s a lot of sales tax).

On the flip side, if you live in certain states, you can also get a huge sales tax benefit by trading in a car. Those states will let you apply your trade-in credit to the total price before tax is applied, meaning it will bring down the overall taxable amount. So you’ll end up paying much less in sales tax upfront. 

Pro tip: Run the numbers first to see what your payments and APR might be when accounting for that extra cash. Better yet, get prequalified to get an accurate estimate of your monthly payments upfront. (Shift’s prequalification tool even lets you shop based on your predicted loan terms.) That’s some savvy financial planning.

Best Road Trip Cars

From summer trips to the beach to winter drives to the mountains, you’ll want a solid car that can handle the long distance in comfort and style. We’ve scoped out the best road trip cars that make the cut in terms of price, style, comfort, and reliability. Happy exploring!

Best for: STYLE

If you don’t have to worry about lots of space for extra riders or gear in a road trip car, and coolness is a premium, these picks are classics to consider.

2012 Ford Mustang GT Premium

2014 Audi A4 Premium

2014 BMW 4 Series 435i

2015 Ford Mustang V6

Used Car Buying Checklist

Best for: TERRAIN

Looking for road trip cars that can handle any kind of weather and road? These are some of your best bets.

2016 Jeep Wrangler Unlimited Rubicon


 

 

 

 

 

2016 Subaru Outback

2015 Dodge Ram 2500 Laramie

Best Road Trips in California

Best for: ROOM

If you’re traveling as a family (or friends), you’ll want to look for something that has the legroom and storage space to accommodate your gear and luggage. These roomy options check both boxes.

2018 Ford Expedition Limited

 

 

 

 

 

2012 Honda Odyssey EX-L

 

2015 Toyota Sienne LE

2014 Jeep Grand Cherokee Overland

 

 

2017 Audi Q7 Prestige

Best for: Fuel Efficiency

Especially if you’re planning to put in serious miles, it’s worth looking into a hybrid. Unlike most electric cars, you won’t have to worry about the battery running out, but still get the benefits of fuel economy. That can really add up on long drives.

2017 Toyota Rav4 XLE Hybrid

 

 

 

 

 

 

 

 

2016 Chevy Malibu Hybrid
Ready to test drive (or buy) one of these sweet rides? We’ve got you covered. 

National Shift Survey on Car Buying

Today we’re releasing data collected from our National Shift Survey on consumers’ experiences with car buying and selling, as well as their opinions on everything from ridesharing to seat warmers.

Drumroll, please….

The Industry Needs a #METOO Movement
Nearly 90 percent of women have felt spoken down to, belittled, or disrespected during the car buying/repair process. Sadly, we shouldn’t be surprised. Data shows car buying is ripe with discrimination and abuse, especially for women and people of color. The status quo is unacceptable – the industry can – and must – do better.

Car Ownership is Here to Stay
We’ve been saying this one for years. The conventional wisdom is wrong about the future of car ownership. According to our data, more than 87 percent of people have no intention of getting rid of their cars for ridesharing. Which makes sense. Have you ever tried strapping a car seat in an Uber? Continue reading “National Shift Survey on Car Buying”

#IHeartShift: 5 Things People Love About Shift

When it comes to finding your perfect car, we at Shift love playing Cupid! During Valentine’s Day, we featured some of our very own happy customers who met their dream cars on our Facebook, Instagram, and Twitter. In case you missed it, we rounded them all up for you here in one post.

Curious about what it’s like to buy or sell a car with us? Just read on and get the scoop straight from the folks who went through the easy-peasy experience!

Continue reading “#IHeartShift: 5 Things People Love About Shift”

How to Pay for a Car — Everything You Need to Know

A car is the second most expensive real asset that most people have, and one of the biggest purchases most people ever make. It’s a big decision and can have a meaningful impact on your monthly budget and financial position. So, how do you pay for a car? We’ve compiled out best tips and tricks.

To finance, or not to finance?

Many of our customers choose to pay for their car with financing even if they have cash on hand — there are a few benefits to doing so.

  • Build your credit: Financing an auto loan can build credit in a few ways. Expanding your available credit and maintaining a history of on-time payments can improve your FICO score. Auto loans are a type of “installment credit,” which means they are paid in fixed installments over a fixed time period. Many lenders view installment credit more favorably than “revolving credit,” like credit cards. You can learn more about credit score basics at Transunion.
  • Build an emergency fund: Personal financial managers generally recommend keeping enough money to cover 3-6 months of living expenses in the bank or a liquid investment account to help deal with unexpected major life disruptions, such as illness or job loss. If you don’t have an emergency fund, it may make sense to prioritize your money to start one and avoid going into debt when unplanned expenses occur.
  • Get a better return on your money: Many Shift customers get low interest rates on their auto loans, starting at 2-4% for well qualified buyers. Instead of paying for the car in cash, some choose to invest that cash to try to earn a higher return. The average term of an auto loan is 5 years. Morningstar Index Performance Return shows that the annualized returns of major stock indices over the past 5 years range from almost 9% to over 18%.Morningstar Index Performance Return
    For example, Jane Smith is deciding between paying cash or financing her $20,000 car purchase at a 3% interest rate. If she chooses to invest, such as in a low-cost index fund, she could grow that $20,000 to more than $32,000 after five years (assume 10% rate of return, where 10% is the average long term return in the stock market). She would pay less than $1,600 in total interest for the loan. That leaves her with more than $10,000 because she decided to invest instead of paying in cash. Consult your investment advisor to see what makes sense for you.
  • Protect your investment without paying everything upfront: Almost half of our financing customers choose to include a vehicle protection plan or gap coverage in their loan. These plans can be a good way to protect against the unexpected costs of owning a car, from breakdowns to accidents. They can typically be included in your financing package, so you don’t have to pay the full cost up front.

Although there are many benefits to financing your vehicle, there are also things to keep in mind.

Cars and taxes: your guide to maximize your money. 

What to consider in deciding how to pay for a car

  • Budget for interest cost: Unlike the 0% APR loans you may have seen advertised for new cars, interest rates for used cars won’t be lower than 2-4%. This means you will pay some amount of money every year in interest. Check out our car loan calculator to understand the cost of interest for your loan.
  • Be aware of hidden fees: Prepayment fees, balloon payments, or other hidden fees can catch borrowers off guard. Prepayment fees, for example, are charged by some lenders if you decide to fully pay off your loan prior to a certain date. If you finance with Shift, you don’t have to worry – Shift financing does not include hidden fees.
  • Shop around: Different lenders may offer different interest rates and terms to the same borrower, so there is a benefit to shopping around. When you apply for financing with Shift, we instantly provide you with the best offer from multiple lenders, so you get the benefit of shopping around without the hassle.

If you’re still deciding how much you can afford, we’ve built a handy car loan calculator to help you find a car that works for your budget. Even if you can afford to pay in cash, financing may make sense if you have better uses for your money, as long as you pay your monthly installments in full and on time. If you decide to finance, you can easily apply today from your Buyer Dashboard or from shift.com.

Please be sure to read your loan contract for the full terms of your specific loan.

Image via Alexa Mazzarello

The 9 Most Extraordinary Cars Available for Rent on Turo

Okay, we admit it, we’re big fans of Turo. They make owning a car just a little bit more feasible and several of us at Shift use their service—a platform that allows car owners to rent out their cars—to make a little side income.

We’ve written about how they make flexible ownership possible and their really interesting BMWs, so before we draw the lucky winner of a dream weekend Turo rental, we thought we’d take a peek at the most notable and bizarre cars in their inventory. Continue reading “The 9 Most Extraordinary Cars Available for Rent on Turo”