The Clarion

Using your tax refund wisely

Tax season reminds us of the importance of being more financially savvy

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Tax season is here and that means large influxes of cash for many students. We need more financial organizations to help citizens manage their money properly, specifically when it comes to large purchases.

I am currently a student at Madison College, but before deciding to return to school I had a lengthy career in the car industry. Since I left that industry a year and a half ago I have saved friends and family tens of thousands of dollars.

Quite a few young people every year use tax refunds that have been inflated with student credits as down payments to purchase new vehicles all across Madison. If you have never purchased a car before you have a large target directly on your wallet, and that tax return check might as well say “FREE TO A GOOD HOME” in the memo line.

I have seen the good and bad sides of an industry that has a nefarious reputation at best. All too often have I seen a young person come into some cash with tax refunds and make a decision that will harm their financial stability for years to into the future.

For example, most people have no idea that in certain situations the interest rates that a dealership will offer you have mark up on them. That means they build in gross profits by charging you more. They call the bank and the bank says, “Hey, we will give Mr. Customer an interest rate of 1.5 percent on that auto loan!”

Then your friendly salesperson turns to you and says, “Great news! The bank called and said they would offer you 3 percent interest on your loan, isn’t that amazing?”

I know a 1 percent increase doesn’t sound like a big deal, that is by design. In actuality a 1 percent increase on your car loan can lead to thousands of dollars extra that you have spent. This is just one example of how this industry and many others are designed to pray on financial ignorance.

Do your homework!

Another aspect of large purchases that many young students don’t understand is how information is king. Market places of all types undeniably changed with the internet/information era. You don’t gain this benefit as a consumer unless you use it.
For the auto market in particular that means that I can know the sale price of almost every vehicle across the country. That lends to negotiating power.

Teaching young adults how to be savvy negotiators on large purchases involves teaching them how to shop and how to get informed. This will, in turn, force predatory financial and market industries to adapt. We see it happening already.

Local companies are adopting “no negotiation, one price” sales platforms, honestly trying to have competitive prices and trying to make the purchasing experience easier.

I am encouraging students and citizens of all ages to take it upon themselves to become more informed before making large purchasing and borrowing decisions.

Do you know exactly what every line on that purchase contract means? Don’t ask the guy who wrote the contract. He will say, “Ah, don’t worry bout it, just legal stuff.”

Instead ask a friend who has been there. Ask your parents, or even ask your boss at work. We can all help each other. This could also provide a real opportunity for smart business leaders to make a positive impact in their community, which could lead to potential sales growths in return.
I know I trust my sales people, this isn’t because they are inherently trust-worthy, it is because I am armed with the knowledge I need to protect myself as a consumer.
This sort of knowledge should be as common place as basic arithmetic. An old saying goes like this, “If you are at a poker table and you don’t know who the sucker is, it’s you.” Don’t be the sucker, arm yourself.

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Using your tax refund wisely