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Should I Use My Stimulus Check for a Down Payment on a Car?

The coronavirus pandemic has had a major economic impact on the United States. Our government is reacting to it with a $2 trillion stimulus package — the largest of its kind in American history — in an effort to keep the economy afloat. Part of that package is a one-time stimulus check from the government to most American adults in the amount of $1,200 per person and $2,400 per couple, plus an extra $500 per child in your household. The income threshold to receive the full amount is a $75,000 annual income for individuals or $150,000 for married couples who file their taxes jointly. Income above those levels means a smaller stimulus check until it’s eventually phased out for individuals with an income of $99,000 or couples with a household income of $198,000.

Would a down payment on a car be a good way to spend this money? It really depends on your situation during this difficult time.

When You Should

If your job is still secure and you don’t foresee a negative impact on your income, then what is essentially free, untaxed money from the government can be spent however you want. A down payment would be a good way to use this money if you were already planning on buying a car soon anyway. Stimulus money could either start your down payment or boost it up to the widely recommended level of at least 20% of the purchase price of the car. You can read more about this in our article on how much money to put down on a car.

We like to recommend making as big of a down payment as you can afford to keep your monthly payments low and your loan term short. The coronavirus pandemic is a good reminder of the fact that owning your car outright with a clear title in your possession is the most financially secure position to be in with your car. This is a good time to not have to worry about a car payment.

When You Shouldn’t

The point of these payments is to help Americans whose income has been affected by the COVID-19 pandemic so they can still pay their bills and buy necessities until the economy gets back to normal. If you’re one of the unfortunate Americans who has been laid off, furloughed or had your hours or pay cut as a result of the virus, then you should be using this money to cover the essentials like your mortgage and groceries or use it to beef up your emergency fund. You can save your car budgeting for when things go back to normal and your income is stable again.

If you do find yourself in a good position to be shopping for a car right now, you’re actually in luck because the coronavirus has created a buyer’s market. Some automakers are offering special financing and incentives in an effort to keep sales up and prevent inventory problems, which is good news for the buyer. But we can’t stress enough: If you really need this stimulus check to supplement lost income, don’t spend it on a down payment!

Looking for more information about you, your vehicle and the COVID-19 pandemic? Check out more of Autotrader’s coronavirus content.

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