With tax refund season approaching in a few months, BHPH dealers can provide new customers with a tax refund estimate based on their last paystub. Based on this estimate, a dealer may schedule a deferred or irregular payment in the contract, allowing the customer to utilize their anticipated tax refund now, which can help structure the deal more favorably. For example, a customer who purchases a car on November 1 could place $1,000 as a down payment and schedule a $1,000 deferred tax season payment, due around March 1, when their tax refund is expected. This strategy may allow the customer to secure a shorter loan term, lower monthly payments, and potentially save on total interest.

There are hundreds, if not thousands, of BHPH dealers nationwide who promote options like this to assist their cash-strapped Q4 customers. However, most dealers implement guardrails to minimize risk. First, it's essential to verify that the customer is indeed receiving a tax refund and that no offsets are expected. The Tax Max program estimator provides this verification. Additionally, it is important that the customer meets your standard underwriting criteria. Ensure that any customer taking advantage of this program has job stability, references, and meets your usual scorecard requirements. Most importantly, this is not a zero-down promotion or a program exclusively for lower-graded customers. A large tax return does not change the fact that a poor-quality customer remains a poor-quality customer if they don’t meet your underwriting standards. This scheduled tax payment option is intended to help high-grade customers who may be slightly short on their down payment in Q4.

Q4 is here, and tax season is just around the corner. If you're a BHPH dealer, this strategy could offer an opportunity to help customers better structure their deals by utilizing future tax refunds now, while also boosting your tax season cash flow from January through March.

Chris Neylan

Chief Operating Officer

Tax Max