Here’s some good news. According to the most recent IRS data, the average tax payer will see a four percent increase in their refund versus the same time last year. This boost in 2024’s average refund size is due to the IRS’ adjustment of many tax provisions for inflation. The standard deduction and tax brackets were set seven percent higher for the current 2023 tax filing year. Because of that, workers whose pay didn’t keep up with last year’s high inflation are on track to get bigger tax refunds, with some lucky ones likely to receive up to 10 percent more in 2024.
And now the bad news. It might take longer to receive that tidy refund than in years past. While the IRS says it issues more than 90 percent of tax refunds within three weeks of receipt, the agency is quite a bit behind that pace in 2024. Several reasons factor into the delay. The agency had an additional week to process returns last year and the overall number of taxpayers filing on time is down. Changes to the tax code, increased safeguards against identity theft, as well as new “Where’s My Refund” tracking software have all impacted processing speed.
For retail automotive dealers and lenders who are counting on the April refund bump in car sales, it’s time to put another plan in place. According to a new study from Bankrate, half of all Americans scheduled to receive a refund are planning to use their checks to pay down debt or bolster savings versus a making a big purchase such as a vehicle. However, there are opportunities for credit unions to boost the odds of capturing those consumers who do decide to apply a tax refund towards a vehicle.
When in the market for their next vehicle, how do people use their tax return? Say it with me – as a down payment. There are benefits to using just the tax return or adding that extra cash with some savings to reduce the overall loan amount. Now is a great time to educate members on how to make the most of their down payment for their budgetary needs.
For some, a tax return might just be enough to purchase an inexpensive used vehicle. If the average refund is in the neighborhood of about $3,000, that translates to a vehicle that likely will require more money to repair and maintain. Attaching the right protection products is critical to protect your auto loan portfolio and the buyer’s wallet.
This year, it’s important to remember that the ‘tax season’ won’t end at the end of April. Refunds may extend well into May, boosting potential cash reserves for members in a savings mode, or lengthening the vehicle search for those who need a ride.
One size does not fit all vehicle buyers. We recommend credit unions:
- proactively reach out to members with older model units who may be ready to purchase once they receive their refund
- work with members who are already in the market to run the numbers on the best use of those refund dollars
- leverage their consumer protection products to differentiate their auto loans and increase automotive lending market share
Our proven team of EFG experts are here to help. We bring years of experience to your team. At EFG Companies, we’re more than an F&I provider, we’re your business partner. Contact us today to learn more about how our team can help you achieve your winning strategy.