Tax Refund Surge Alert: The Down Payment Solution Dealers Have Been Waiting For

Bottom Line Up Front

The answer to your down payment struggles is coming. JPMorgan estimates that significantly higher refunds are coming in early 2026, providing customers with the down payment dollars dealers desperately need to reduce cash-in-deal and close more sales.

According to JPMorgan Asset Management's recent analysis, tax refunds in 2026 are expected to be substantially higher than in previous years, creating an unprecedented opportunity for auto dealers to solve their down payment challenges. The financial giant estimates that the IRS could process 110 million refunds for an average of $3,743 per payment, compared to the current average of $3,278. This represents hundreds of additional dollars per customer that can go directly toward down payments, turning marginal deals into solid approvals. Consumers who make less than $70,000 and have dependents could see tax refunds in the $5,000 - $10,000 range.

The surge is driven by the recently passed One Big Beautiful Bill Act (OBBBA), which includes several retroactive tax breaks that took effect on January 1, 2025. What makes this particularly significant for dealers is that the IRS isn't changing withholding schedules, meaning taxpayers will recoup the full value of these tax breaks through bigger income tax refunds when they file their 2025 taxes early next year.

For dealers working with subprime customers, this news represents a game-changer. The legislation includes substantial increases to the Child Tax Credit and the scheduled Earned Income Tax Credit (EITC) increase indexed for inflation, which will directly benefit working families that make up a significant portion of your customer base. These customers have been hit hardest by inflation while struggling to save money for down payments. The enhanced credits mean families who received modest refunds in the past could see dramatically larger payments—money they'll be anxious to use toward getting reliable transportation.

Meanwhile, your prime and near-prime customers are also positioned to benefit significantly from the unchanged withholding schedules. Since the tax breaks are retroactive but withholdings haven't been adjusted, these customers will see their refunds boosted by hundreds or even thousands of dollars above what they typically expect. For dealers, this means customers who might normally put down $2,000 could suddenly have $3,000 or more available, dramatically improving loan-to-value ratios.

Unlike previous years when customers might receive their standard refund and use it to catch up on bills, this year's enhanced refunds provide a real surplus that customers will be eager to put toward major purchases. Customers understand the value of using refund money for down payments—they know larger down payments mean lower monthly payments and better financing terms. This year changes that equation entirely.

Many of the tax credits driving these higher refunds are tied to inflation adjustments, meaning this could be the beginning of several years of enhanced refund seasons. For dealers who have struggled with down payment issues throughout the inflationary period, this represents a fundamental shift in market dynamics.

This is where services like Tax Max can help any dealer maximize this unprecedented opportunity. As we approach the 2026 tax season, more and more information will become available about how tax refunds will be higher this year, getting customers excited about their enhanced purchasing power. By utilizing a program like Tax Max, you have many ways to get ahead, be first in line, and ensure that when your customer is ready to buy and has the refund dollars in hand, they will be at your dealership first.

We all know that tax season is coming, and you should be excited about the refund boosts. Now make sure you have a plan and are ready to be first in line when the tax money becomes available. MarketWatch Article Link

Christopher Neylan
Chief Operating Officer
Tax Max