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2015-12-01 Tax Refund Advances Are Back In 2016!

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 recommendations.

 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 marketing.

 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.