A study done in February 2011 by the National Endowment for Financial Education shows that close to 50% of taxpayers planned to use their tax refund to pay down debt, and another 44% planned to save their refund. Indeed, today’s economic climate moves consumers to be far more cautious about how they spend their refunds, and will only spend that money on what they deem to be a smart investment.
While some may view this as a challenge to auto dealers seeking to use tax season to leverage sales, this is a great time to educate your consumers about the value of a new automobile as a smart investment in themselves or their family.
Tax Refund Marketing: Is It Enough?
Auto dealers understand that cars fall into the “smart investment” category. They also understand that tax season may be the only time of year when consumers will have access to a substantially large chunk of cash that can be spent on a vehicle.
However, with one out of five Americans suffering from poor credit, those consumers aren’t willing to take the risk of buying a car with their tax refund and still accruing a large monthly payment as a result of that purchase. As a result, many dealers are finding out that it’s simply not enough to market the use of the tax refund as a viable purchasing option to potential buyers.
Trade-ins AND Refunds Go Hand–in-Hand
The key for auto dealers is to educate consumers about the value of investing in a new car using both their tax refund AND a trade-in. A marketing strategy that helps the consumer understand their smart investing options will pave the way for willing buyers to take the plunge and make that new car their investment.
How then, does the dealership market to the potential tax refund car buyer who is looking for a wise investment and who needs a new vehicle, but is hesitant about trading in? Here are some points to consider when constructing an effective auto dealership marketing campaign and conveying the message to potential buyers:
- The buyer’s trade-in will never be worth more than what it is today. The longer a customer has their vehicle, the older is gets and the more miles they’re putting on it. So the longer they wait to trade-in a vehicle, the less they will get from it.
- There is a lack of used cars being traded-in for new cars these days, so there is a good chance that the dealership will accept the trade-in.
- The more a buyer puts down toward the purchase of a new car, the lower their payments will be, so adding a trade-in to their tax refund as a down payment will greatly lower their monthly rates. This is especially important for buyers with bad or no credit to know, because their main concern is most likely the high payments that may come from purchasing a new car.
- Now is the time to take advantage of low interest rates. As the economy recovers from a difficult recession period, interest rates on auto loans begin to climb. All car buyers, even those whose credit has taken a beating in recent years, who have a good down payment and a trade-in are at an advantage now to purchase a new vehicle with low-interest financing.
- Tax season can be a time for auto dealerships to leverage sales, provided that the right sales strategy is used to reach out to consumers looking to make a smart investment with their tax return.