- Fifty-nine percent of respondents between 18 and 28 years old said they planned to use all or some of their refund to get a new or used vehicle this year. Just 26 percent of shoppers ages 66 and older who said they planned to do the same.
- Across all age groups, 43 percent of consumers planned on using all or some of their refund for a vehicle purchase.
- A quarter of respondents (25 percent) have used a refund in the past to buy a new or used vehicle.
- Thirty-nine percent of shoppers between 18 and 28 years old expected their refunds to increase. Meanwhile, just 14 percent of consumers over 65 expected their tax refund to increase.
- Fifty-eight percent of consumers 18 to 28 years old believed tax season was a good time to get a new or used vehicle. Just 32 percent of shoppers over 65 said it was a good time to buy a vehicle.
This year’s tax season could bring an unpleasant surprise for the auto industry: refunds ain’t what they used to be.
Like Christmas in April, tax refunds bring a much-needed jolt of income to millions of households across the country. Many consumers use the money for large purchases they’ve been putting off throughout the year, including a new vehicle.
A recent Autolist.com survey found that younger shoppers, in particular, are twice as likely to use their refund check from Uncle Sam on a new or used vehicle than older buyers.
But there are ominous signs that tax reform legislation passed last year could upend that practice. Not only are early refund amounts down from last year, but Autolist’s study also found that younger buyers -- the very people most inclined to spend their refund on a vehicle -- aren’t as aware of the impacts of this legislation as their older counterparts.
Autolist surveyed 1,838 current car shoppers in late January and early February to gauge how -- or if -- they planned on spending any of their tax refund on a new or used vehicle this year.
Fifty-nine percent of respondents between the ages of 18 and 28 said they planned to use all or some of their refund to get a new or used vehicle this year. That compares to just 26 percent of shoppers ages 66 and older who said they planned to do the same.
Overall -- across all age groups -- 43 percent of respondents said they planned on using all or some of their tax refund to buy a vehicle this year.
At least part of the discrepancy in spending habits is likely due to the fact that younger buyers are more reliant on their annual tax refund as a crucial influx of cash to supplement their income. Older buyers with relatively higher incomes don’t need to rely on their refunds to make large purchases like a vehicle.
Younger car shoppers were also more optimistic than their older counterparts when it came to estimating the size of their tax refund this year.
Thirty-nine percent of shoppers between 18 and 28 years old expected their refunds to increase. That compares to just 14 percent of consumers over 65 who expected their tax refund to increase. Across all age groups, 39 percent of consumers expected their refund to increase this year.
Early tax refund data shows that the younger group could be in for a rude surprise.
According to the IRS, during the first week of returns this year, the average tax refund was down 8.4 percent and the number of people receiving refunds at all dropped by a quarter.
Much of this is being blamed on the tax reform that Congress passed last year and which President Trump signed into law. While the legislation did lead to a tax cut for many Americans, the reforms also changed numerous tax codes that could affect the size of filers’ refunds, particularly if they didn’t amend how much they had taken out of each paycheck during the year.
Older consumers were more aware of these potential changes, Autolist’s survey found.
Sixty-four percent of people over 65 years old said they knew that last year’s tax reform bill could change the size of their refund. Meanwhile, just 45 percent of 18 to 28-year-olds said they expected the same.
That could have a cooling effect on auto sales this spring; younger buyers who had been counting on a larger refund to use on a vehicle will have to readjust their finances or put off the car purchase for a while.
That might not be a bad thing. Most experts agree that tax season is generally not the best time to get a good deal on a car -- new or used.
Vehicle sales are generally strong in the months after President’s Day in February and before Memorial Day in May. Many of these sales are attributed to the sizable refund checks burning a hole in consumers’ pockets during that time. Because demand is robust, dealers are less inclined to have sales or cut deals, so if you can, wait until the end of May to do your car shopping.
But don’t tell this to younger shoppers. Autolist’s survey found that 58 percent of consumers 18 to 28 years old believed tax season was a good time to get a new or used vehicle. Older respondents were wiser; 32 percent of those polled who were over 65 said it was a good time to buy a vehicle.
Across all 1,838 respondents, an average of 48 percent of consumers thought tax season was a good time to buy a car.
Autolist also found that the idea of using tax refund monies to get a new or used vehicle was foreign to a majority of respondents. A full 72 percent said they had never done so before; 25 percent said they had used all or some of a prior year’s refund to get a vehicle, three percent were unsure.