By William Neylan, III
Tax season is like Christmas for all types of car dealers –retail, franchise, BHPH (buy-here, pay-here), and LHPH (lease-here, pay-here).
Some car dealers do more to maximize their first quarter tax season, and those dealers end up selling more cars than those who don’t take any action. So, you may ask, what do the best car dealers do?
Starting January 2, every car dealer should promote some type of “File and Drive” promotion. This is a promotion where a customer can file their taxes at their local dealership and use their refund as a down payment to drive off the same day. How does it work? A tax return is filed, and through a tax season partner, the car dealer can access a same-day refund advance, allowing the customer to get approved for up to $7,000 against their tax refund.
When a customer applies for a refund advance, there are three possible scenarios:
- The customer is approved for the full amount of the advance, up to $7,000. In this case, try to negotiate as much of a down payment as you can get. The money is in the dealer’s hands, and the strength of the program is that you know exactly how much the customer has to potentially put down. If they filed their taxes elsewhere, they may have received the $7,000, but they might tell you they only have $700 to put down. The dealer can negotiate with power in this scenario.
- The customer is approved for a partial advance, and it doesn’t cover the required down payment. Dealers need a strategy to handle these situations. You can try to secure more money elsewhere, offer a different vehicle, introduce a layaway program, or create a side note. If the customer is approved for a refund advance, statistics show there is a 96 percent chance that the IRS will release the refund, and the money will still be sent to the dealership.
- The customer is denied. Around 13 percent of customers may be denied due to garnishments against their refund, such as defaulted student loans, past-due child support, IRS and state liens, or other federal obligations. If a customer is denied, I recommend proceeding under the assumption that they won’t receive a refund and try to get the down payment from another source.
This promotion should run from January 2 until March 15. Dealerships should actively promote their tax season sales event on their website, online, and on social media.
The IRS releases most tax refunds at the end of February and the beginning of March, so dealers can expect another rush when the money is disbursed. If you were a dealer, wouldn’t you want control of that money? Wouldn’t you want to secure an additional 20–30 tax season sales before the IRS releases the funds?
As of this writing, the average refund we are seeing is $6,137. Wouldn’t you want that money in your hands to negotiate with power? The alternative is negotiating with weakness and relying on the customer’s word about how much money they actually have.
I believe it’s important to know exactly how much the customer is receiving and how much they have available so you can sell a car that benefits both you and your dealership. And by the way, it also benefits the customer.
William J. Neylan III
President/CEO
Tax Max
trs@taxrefundservices.com
