December 1, 2015
By Chip Wiley
Tax Max / Tax Refund Services
After 4 years on the shelf, the banking industry has revived
the Tax Refund Advance for 2016. This
means that much needed funds are expected to be in the hands of consumers in
mid-January. Many can expect up to $750
in 24 hours or less.
Prior to 2012, customers became accustomed to 24 hour refund
loans. The old RAL
(Refund Anticipation Loan) was greatly frowned upon by the current
administration in Washington. Consumer protection advocates argued that the
fees were too high and the APR was unacceptable. The latest reincarnation has put all of these
concerns to rest. This is a win-win for
both the dealership and the customer.
Come January, many of the new Tax Refund Advance products
that are being proposed will come with zero APR and zero application fees.
Recent history has brought about the new normal of a 5 to 21
day tax refund cycle. This will still
exist in 2016. The difference that is
generating additional excitement is the opportunity to obtain up to $750 within
24 hours, without a credit check.
The demand for the return of the Tax Refund Advance comes
largely in response to the decline in traffic seen by the professional tax
preparer. Self-preparation software such
as TurboTax and TaxAct seized control of the market after the RAL disappeared.
Consumers seem to have become unconcerned with their own
personal qualifications to file a tax return.
The market is hoping to capitalize on the primary, pre-2012 draw to the
local tax preparer: the enticement of fast money.
Banking institutions within the tax refund industry market
have seen dramatic declines in revenues since 2012. Self prepared tax returns bypass these
companies, resulting in reduced customer counts. An old product in the form of a Tax Refund
Advance is seen as the new hope to reverse these trends.
Such trends have been mirrored at car dealerships who have
not focused on the tax refund customer.
Many lament that tax season is not what it once was. This phenomenon is due to both the refund
loan hiatus and more aggressive competition.
Dealerships on the sidelines have seen the competition on
the field steal their market share while garnering higher down payments. Those with tax refund strategies have seen a
steady rise in business, leading to a decline for the rest.
Tax refund marketing has evolved over the past 5 years to
counteract the absence of the refund loan.
Now that the Tax Refund Advance has re-emerged, customer traffic is
expected to soon follow.
Where can customers get these refund advances?
Dealerships need to contact their tax refund season company
partner to verify if they are a participant in this program. Not all tax preparers will be participating
as not all tax refund associated banks are expected to offer the Tax Refund
Advance product. Ask around, contact
your state association, or contact national associations like NIADA or NABD for
How can I benefit from this?
The obvious answer will be from the early influx of tax
refund dollars into the market. In the
past 2 years, tax refunds started paying out between January 29th and
through February 5th. Tax
Refund Advances are expected to begin in the January 15th through
January 22nd timeframe.
Dealers “In The Know” will have the advantage with the timing of their
People want their refund money yesterday, so the allure of a
24-hour check is a major draw. Dealerships
that work directly with a tax refund partner stand to profit the most. These companies thrive on the success of the
sale of the vehicle and increased down payments, thus creating an essential
partner in this critical time of year.
Being able to offer your customers the ability to get their hands on
early tax season money is key.
How much will this cost the customer? How much will this cost the dealership?
Ask your tax refund partner company for more details. Some Tax Refund Advance products come at no
additional cost to the customer, no additional cost to the dealership, and with
no credit checks.
Can I expect increased traffic from this?
That is up to you, your sales staff, your marketing, your
online presence, and your vigilance to capture the tax refund customer.
If you are content with the business you attracted last
year, then no…you should not expect and increase. In fact, your business should drop again this
year. The significant beneficiaries will
be the business owners who go after the customers and bring them in the
door. This can be used as an opportunity
for sales, repairs, collections, special payments, irregular payments, or
back-end product upgrades.
Remember, $750 is a lot of money, but customers will spend
it faster than it arrived. Be proactive
with the intent on seizing opportunities such as this one while your
competitors sit on the sidelines. Many will
not know this money is coming. It is
your chance to steal market share.