Tax laws are always changing, and with these changes come new opportunities for all businesses, including Buy Here, Pay Here (BHPH) dealerships. Last year’s Tax Cut and Jobs Act promises to put a lot more money in the pockets of potential car buyers who have been waiting for the opportunity to replace their vehicle. Here are a few tips to help keep you informed and protected this tax season.
One of the features of last year’s tax cut is an increase in the Child Tax Credit, which could increase refunds by as much as $1,000 per child. An increase in the Earned Income Tax Credit can add a few thousand dollars on top of that. This extra cash can help subprime buyers overcome some credit hurdles and give you a bit more to work with. Buyers who have more money in their pockets will be able to consider a wider assortment of the vehicles you have on your lot.
The PATH Act, passed a couple years ago, has changed the timing of tax season a bit. Certain tax refunds, including those on returns that claim the Earned Income Tax Credit or Additional Child Tax Credit, won’t be issued until February 15th. The extra time is intended to help the IRS stop fraud such as identity theft and fabricated withholdings.
However, there’s no need to wait until February to plan your sales strategy. Customers who anticipate a refund will may have been thinking about a new car for weeks already. To get people into your shop, it is never too early to advertise. You can help encourage potential buyers with a “drive now, pay later” program based on customers’ anticipated tax refunds. A partnership with a local accountant or preparer can help you estimate and verify these expected funds based on customers’ pay stubs or W-2 forms.
Tax season can be a lucrative time for a BHPH dealership, as customers with fresh money (or expected money) come in looking for deals. That is why it is so important not to waver on your STIP list. Identity theft, deception and fraud do not go away just because customers have more money to spend. Diligently validate every customer’s identity, income, and contact information to reduce the risk of loss.
GPS-based solutions such as LenderOutlook can help you minimize risk and maximize profit during tax season. When you are dealing with under-banked or otherwise disadvantaged customers, a GPS tracking system can help you collect payments on time and recover vehicles easily if something goes awry. The LenderOutlook solution, which includes reliable CalAmp hardware and an easy-to-use web portal for tracking and reporting, provides real-time location and other vehicle data to significantly reduce the costs associated with collections, repossessions, and loss. What’s more, with vehicle mileage reports, LenderOutlook can help you identify customers who are using their vehicles in ways they shouldn’t.
To learn more about how LenderOutlook can help you confidently increase your bottom line this tax season, see here.