DETROIT — The strength of the U.S. automotive industry will face an early test this spring that has nothing to do with cars or trucks.

With tax season starting, industry experts are projecting that some Americans, many of whom have been priced out of the new-vehicle market, will use anticipated higher tax returns to purchase a new or used vehicle.

Extra cash on hand could lend a needed boost to an industry that’s suffering from slowing vehicle sales — or it could reveal continued problems for the automotive industry with inflated prices and consumers still reluctant to spend on big-ticket items.

“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.

The average IRS tax refund is up 10.9% so far this season, compared with 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.

The increases were expected under tax changes by the Trump administration, including the One Big Beautiful Bill Act signed in July. That legislation removed taxes on overtime and tips and allowed eligible taxpayers to deduct up to $10,000 in annual interest paid on loans for new, U.S.-assembled vehicles purchased, among other adjustments.

Many of the tax changes were made retroactive to January 2025, which means taxpayers may have withheld more than they will ultimately owe.

“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 time frame,” said David Oakley, GlobalData manager of Americas vehicle sales forecasts.

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.

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.

Back then, though, federal interest rates were near zero compared to the current Federal Reserve funds rate of 3.5% to 3.75%, and the inventory of new vehicles was low. Now, with higher borrowing costs, but improved inventory, the equation could be different.

More buyers are agreeing to longer-term loans amid higher financing costs and prices. Putting down extra cash can help lower monthly payments, which Carmax’s Edmunds reports reached a record of $772 per month for new vehicles during the fourth quarter.

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.

“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.

Consumers could choose to use higher tax returns to pay off credit card debt — which nationally stands at a record level of $1.28 trillion, according to a report last week by the Federal Reserve Bank of New York — or replenish their savings after a period of persistent inflation.

U.S. consumer confidence fell to 84.5 in January, the lowest level since May 2014, driven by intense anxiety over high prices and a weakening labor market.

“It’s only confident people, people who feel comfortable about their economic fortunes of the economy of the United States, that are going to be interested in taking out a $40,000 or $50,000 auto loan,” Chesbrough said. “It’s a very difficult situation right now.”

— CNBC’s Kate Dore contributed to this report.

LONDON — European stocks opened higher on Wednesday as investors weighed the latest U.K. inflation data and monitored global market developments.

The pan-European Stoxx 600 was roughly 0.5% higher shortly after the open, and the U.K.’s FTSE 100 and France’s CAC 40 were up 0.3%, while Germany’s DAX rose 0.4%.

German life sciences company Bayer extended losses and was down 7.3% in early trading after its Monsanto Unit had proposed paying $7.25 billion to settle lawsuits claiming that its weed killer Roundup was causing cancer, it said in a press release on Tuesday.

It said it expects its provisions and litigation liabilities to rise from 7.8 billion euros ($9.24 billion) to 11.8 billion euros, with approximately 5 billion euros in litigation-related payments in 2026. Bayer expects a negative free cash flow for this year.

The UK inflation rate fell to 3% in January, according to the latest figures from the Office for National Statistics. Economists polled by Reuters had forecast the consumer price index to fall to 3%, down from 3.4% in the twelve months to December.

“The UK has experienced higher and more prolonged inflation compared to the US or eurozone area, but today’s data shows the tide is changing,” David Smith, portfolio manager at Henderson High Income Trust plc, said.

“Inflation is likely to drop to 2% by the end of the year if not earlier, opening the door to further interest rate cuts by the Bank of England,” Smith added.

The British Pound was flat against the dollar following the as-expected data, at $1.3562. British government bond yields, known as gilts, also held steady.

Sterling dipped and British government bond yields fell during Tuesday’s trading session after data showed the U.K.’s unemployment rate rose to a five-year high, while wage growth slowed.

Earnings on Wednesday come from Glencore, BAE Systems, Orange and Euronext. 

Asian stocks pushed higher overnight in holiday-thinned trade with markets in mainland China, Hong Kong, Singapore, Taiwan and South Korea among those closed for Lunar New Year holidays.

U.S. stock futures were near the flatline in overnight trading after a tepid session on Tuesday. Traders on Wednesday will be watching for the Federal Reserve minutes from the policymakers’ January meeting.

The next big catalyst this week, however, will likely be the personal consumption expenditures price index reading that’s due on Friday. The PCE, the Fed’s preferred inflation gauge, will give further insight into the state of the economy.

— CNBC’s Pia Singh contributed to this market report.

The U.K. inflation rate cooled to 3% in January, according to the latest figures from the Office for National Statistics (ONS).

Economists polled by Reuters had expected the consumer price index to fall to 3%, down from 3.4% in the twelve months to December.

Core inflation, excluding energy, food, alcohol, and tobacco, stood at 3.1% in January, down from 3.2% in December.

The data will be closely analysed by the Bank of England as it looks for further signs to confirm its view that the U.K.’s inflation rate will fall close to the central bank’s 2% target by April.

U.K. jobs and wage data out Tuesday gave the BOE further signs of weakness in the labor market and an easing of inflationary pressures with the unemployment rate rising to 5.2% in December, the highest level in five years. Annual wage growth, a key inflation metric closely watched by the central bank, weakened in the last three months of 2025.

Growth data released last week showed the wider slowdown continued, with the economy growing a meager 0.1% in the fourth quarter. We’ll get another shot of economic activity in the country this coming Friday when purchasing managers’ index (PMI) data is released.

Economists expect that the latest batch of data could prompt the BOE to cut its benchmark interest rate, currently at 3.75%, at its next meeting in March.

“The gloomy picture painted by recent U.K. growth figures and today’s evidence of a lacklustre jobs market has increased the likelihood that the Bank of England will cut rates at the next meeting in March. It has also increased expectation that rates could reach as low as 3% by the end of the year,” Danni Hewson, head of financial analysis at AJ Bell, said in emailed comments Tuesday.

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