The April 15 deadline put the official close to the vehicle tax selling season, with dealers across the country assessing how they fared under the new tax rules ushered in by the One Big Beautiful Bill.
What we know: Entering the final week before the tax deadline, the IRS reported:
The average refund increased by 11.1% to $3,462 compared to the 2025 return of $3,116.
Overall, the IRS had sent back $241.7 billion, an increase of 14.5%.
No tax on tips and overtime, larger standard deductions, and increased credits under the new tax laws, including interest on a new car loan.
Why this matters: Going into the tax season, dealers hoped to see a larger percentage of those refunds being spent on vehicles.
But on the ground, dealers of different sizes and business models experienced a mix of traffic patterns in the first quarter, complicated by customers also dealing with rising gas prices and continued high interest rates.
Gas prices increased by more than $1 from the end of February to April, topping $4 nationally, according to AAA, due to the conflict in the Middle East.
Interest rates on new vehicle loans ended February at 9.77% and used rates at 14.75%, according to Cox Automotive’s Dealertrack.
“Year-over-year, some stores are up, and others are down. Our South Florida store is up 30%,” said Cole Potamkin, CEO of the Potamkin Automotive Group, who operates 14 dealerships across the country.
“Any expectations for this year were reset at the end of February with the war. But we remain optimistic about business and the rest of the year…If the war comes to an end soon, inflation is curbed, and [Federal Reserve Chairman nominee Kevin] Warsh pushes down rates, we could see a monster Q4 in ’26.”
Cole Potamkin
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In the used market: Hertz reported an uptick in traffic, with consumers searching for newer pre-owned models, slightly more affordable than new vehicles in the $40,000 range compared to $50,000.
“What we’re seeing at Hertz Car Sales this tax season is a buyer who knows exactly what they want: maximum vehicle for their money,” said Chris Berg, Executive Vice President of Global Fleet Management at Hertz, in a statement.
“Near-new inventory, vehicles a year old or less with low mileage, is proving to be the smart play in today’s market.”
CarMax’s earnings report from Q4, which ended February 28 and only included very early tax refunds, showed a slight downturn in sales at 181,188 units, down from 182,655 units in Q4 2025. The remaining tax-season sales will be released as Q1 numbers.
On the other hand: Jason March of March Motors in Jacksonville, Florida, reported a 10% increase in subprime sales from January to April.
“I’m happy with how it went. The last couple of years, tax season has not been as exciting,” March said. “We took the news out of Washington, prepared for tax season, and bought a few more vehicles. I don’t think we’ve had that kind of influence before…It was our best tax season in three years.”
Zooming in: The one area March did not see a rise in was with down payments.
“They were not as large as I thought they would be. The economy is still reeling, and people are adjusting,” March said.
Adding to his sentiments: Though tax returns increased, Edmunds noted in the used market, down payments decreased from $4,373 in 2025 to $4,212 this year.
The down payment amount also dropped from 15.3% of the transaction price to 14.5%, even as the transaction price jumped from $28,591 to $29,058.
“The data shows that reduced down payments are not a new trend, as this has been building for several quarters. As used vehicle prices rise faster than the average tax return, it's increasingly difficult for the refund alone to fully fund a down payment,” Ivan Drury, Director of Insights at Edmunds.
Bottom line: This was the first tax season under the One Big Beautiful Bill, which changed the refund amount many taxpayers received. But inflationary pressures from higher fuel prices and continued high interest rates complicated the market and early data. It will likely take another tax season and a change in the market before dealers will receive reliable data on consumer habits.
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