It’s tax season and that typically means big business for those operating in the retail automotive space. Dealers and lenders alike benefit when consumers flock to dealerships in March and April with tax refunds in hand.
However, this year the IRS is reporting about an eight percent decrease in the average tax refund. Having already processed more than 13 million tax returns, the average refund is landing around $1,865.
What can that buy when it comes to vehicles? If we go by the standard of putting 20 percent down on a new vehicle and at least 10 percent on a used vehicle, $1,865 doesn’t go very far.
According to Forbes and USA Today, the average new car costs $36,000, and used cars are retailing at $19,657 on average. That means this year’s tax refund isn’t even close to covering the down payment for a new vehicle, and consumers will still need to come up with about $1,000 to meet the 10 percent minimum for a used car down payment.
What does this mean for auto lenders? Most likely, fewer consumers will be shopping for vehicles this spring, and those that are in the market will likely be shopping for used vehicles. As the pool of consumers shrinks, lender competition should increase. Continue reading