“Their new tax bill is actually going to be less, and they’re going to be getting more in their tax return. It’s going to be a little bit of a surprise, we think, for a lot of potential buyers out there,” said Cox Automotive senior economist Charlie Chesbrough at a recent auto analyst conference.<\/p>\n
The average IRS tax refund is up 10.9%<\/a> so far this season, compared to the same point in 2025, according to early filing data. As of Feb. 6, the average refund amount was $2,290, compared with $2,065 reported about one year prior.<\/p>\n The increases were expected under tax changes by the Trump administration, including the One, Big Beautiful Bill Act<\/a> signed in July. That legislation removed taxes on overtime and tips and allowed eligible taxpayers to deduct up to $10,000<\/a> in annual interest paid on loans for new, U.S.-assembled vehicles purchased, among other adjustments. <\/p>\n Stock Chart IconStock chart icon Auto dealer stocks<\/p>\n Many of the tax changes were made retroactive to January 2025, which means taxpayers may have withheld more than they will ultimately owe.<\/p>\n “Although it’s a bit of an unknown, it feels like it could be really beneficial to vehicle sales, particularly in that sort of Q1-Q2 timeframe,” said David Oakley, GlobalData manager of Americas vehicle sales forecasts.<\/p>\n March is historically one of the top months for U.S. vehicle sales, especially for used vehicles. The month has represented 9.1% of annual new vehicle sales on average over the past 12 years, according to Cox, trailing only the month of December at 9.3% of sales. <\/p>\n Many of the recent tax changes also assist middle- and higher-income consumers who may decide to pull ahead a vehicle purchase. The industry saw a similar dynamic during the Covid pandemic when the Trump administration issued many Americans $1,400 stimulus checks<\/a>.<\/p>\n Back then, though, federal interest rates were near zero compared to the current Federal Reserve funds rate of 3.5%\u20133.75% and inventory of new vehicles was low. Now, with higher borrowing costs, but improved inventory, the equation could be different. <\/p>\n More buyers are agreeing to longer-term loans amid higher financing costs and prices. Putting down extra cash ahead of time can help lower monthly payments, which Carmax’s<\/a> Edmunds reports reached a record of $772 per month<\/a> for new vehicles during the fourth quarter.<\/p>\n The average transaction price for new vehicles in the U.S. was hovering around $50,000 toward the end of last year, up 30% from the start of 2020, according to Cox.<\/p>\n “What we don’t know is with consumer finance so stressed already, is that extra money already spent? Whether that’s going to be in the pockets. It’s a really mixed bag out there,” Chesbrough said. <\/p>\n Consumers could choose to use higher tax returns to pay off credit card debt \u2014 which nationally stands at a record level of $1.28 trillion<\/a>, according to a\u00a0report\u00a0last week by the Federal Reserve Bank of New York \u2014 or replenish their savings after a period of persistent inflation. <\/p>\n![\"hide](\"https:\/\/static-redesign.cnbcfm.com\/dist\/a54b41835a8b60db28c2.svg\")
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