With the deadline to file federal income tax forms passing on April 18, Cox Automotive chief economist Tom Webb reflected back on what’s known as tax season but likely isn’t the resounding retail period for buy-here, pay-here dealers it once was.
Perhaps impacting this year’s season most was the change in federal rules requiring tax refunds involving the Earned Income Tax Credit or the Additional Child Tax Credit to be held until Feb. 15. Webb mentioned that when that date arrived, “the flood gates opened,” and a record $74 billion in tax refunds was distributed during the single week ending Feb. 17.
According to the latest data from the Internal Revenue Service that Webb cited, total refunds still surpassed $200 billion by the close of March. They remained off year-over-year by only about 0.8 percent or $1.8 billion.
During his last conference call for the company, Webb said the refund activity eventually sort of shook itself out by the time the first quarter closed.
“It really had less of an impact than I would have expected. It was not delayed all that much,” Webb said about the new federal mandates. “That flow of funds over $70 billion in the one week ending Feb. 17 pretty much got us back up to where we should have been. You’re talking a delay of two weeks, maybe in terms of flows of actually funds.
“In speaking with dealers, it was a relatively modest setback,” he continued.
“Speaking to lenders, people used that money to get themselves right,” Webb went on to say. “It probably made their delinquencies look a little worse than they normally do in the first part of February. Then people get caught back up.
"I think it had more of an impact on those delinquency measures than the actual used-vehicle retail deliveries,” he added.
And speaking of those deliveries, as many BHPH operators are doing, they’re leveraging solutions from companies such as TaxMax to turn metal as the holidays arrive.
“(Tax season) certainly has been less of a boost than what we’ve seen in the past. Some of that is due to the fact that dealers have been able to smooth it out a little bit,” Webb said. “Many of them use those down-payment deferral programs and are actually buying vehicles at auction in October and selling them in November and December through those programs.
“The down payment deferral program is basically the same thing without the regulatory problems,” he continued. “It’s good for dealers to smooth out that process.”
Larry Dixon, executive analyst at J.D. Power Valuation Services, elaborated about the impact of tax season in a video available here as well as at the top of this page.