At an average of more than $3,000 per return, up 3% year-over-year, annual tax refunds can be an excellent motivator for many Americans considering purchasing a new or used vehicle. In addition to things like student-loans and home repair, the revitalized auto market is poised to garner a sizable share of tax refund dollars this season.
But what types of vehicles will be in greatest demand during tax time? Shoppers with average incomes and ordinary credit typically seek out late-model used and certified pre-owned vehicles – cars three to four years old, in most cases. When you run the numbers, it makes sense.
A $3,000 refund turned into a down payment on a $15,000 vehicle equates to a healthy 20% of vehicle equity. Account for shoppers who may also need to use a portion of their refund for immediate expenses, and you’ve got a window of highly sought after vehicles between $10,000 and $15,000.
To take advantage of these conditions, not to mention the benefit of having five selling weekends in March, dealers should look to call out this type of inventory on their lots and in their online advertising throughout April, at a minimum. Highlighting the unique value of late-model and CPO vehicles can help educate customers and differentiate your dealership from competitors, and every detail matters. On used cars particularly, merchandising – taking quality photos, writing vehicles descriptions and pricing competitively – is essential, so make sure you’re back on the lot replacing photos of snow-covered inventory at the first glimpse spring.
And remember, shoppers place a premium on the peace of mind that comes with CPO vehicles. In a related study, we found that 56% of shoppers view CPO status as being worth an additional $1,000 – $2,500, with 25% of shoppers willing to pay $2,500 or more. There’s also high overlap between this range of new, used and CPO buyers. On the sales floor, there’ll likely be opportunities to convert an on-the-fence new-car shopper into a CPO buyer and vice-versa, so help your team prepared to move through all possible vehicles options.
Although winter weather is still lingering throughout much of the country, as spring approaches, brace for a lift in new and used-car sales. It’s a psychological phenomenon – a slight increase in temperature and a bump in consumer bank accounts will set off the spring and summer buying season in no time.
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