What Are New Car Rebates and Dealer Incentives

What are new car rebates and dealer incentives and how can they save you money when buying a new car?

New car rebates and dealer incentives are marketing support programs available to consumers and dealerships to help stimulate retail new car sales.

These programs come in several forms.  Some manufacturer programs include huge discounts on the vehicle’s price and will provide additional savings.

What Are New Car Factory Incentives and Cash Back Rebates

Factory incentives and customer rebates are marketing support programs available to dealerships and consumers to help stimulate retail new car sales. These programs come in several forms. Some discounts are highly advertised, and some are private incentives you may have to dig to find. I will show you how to search and use them to your advantage.

There are two ways a manufacturer can provide financial support to dealers to help them market new cars to consumers and stimulate recent car sales.

  • Manufacturer to customer cash back rebates and incentives
  • Manufacturer to dealer incentives

Manufacturers will run these programs at different times of the year. If you fail to research this information up front or ask about these programs, you will never know if the vehicle you’re looking to purchase has one available. To make matters worse, most dealers will not come out and offer them to you.

This section will provide you with the information and the tools you’ll need to understand how these special programs work and how to check to see if a vehicle you want to buy has a rebate or incentive attached to it.

Types of Manufacturer to Customer Rebates and Incentives

The most common programs are provided to consumers directly from the manufacturer. Depending on the vehicle, there may be more than one program available.

  • Low-interest financing
  • Special lease programs
  • Cashback rebates

Some manufacturers will also provide special programs such as military discounts, first-time buyer incentives, or other programs to target particular customer niches and offer further discounts to help dealers sell new cars.

Secret New Car Incentives From the Manufacturer to Dealer

Another way manufacturers provide support to their dealers is in the form of a factory-to-dealer cash incentive.

Each dealership may or may not negotiate this incentive with a car buyer. These types of programs are also called “secret incentives.”

These types of incentives are used to push the sale of specific vehicles or older model vehicles that are phasing out. Manufacturers use dealer-cash-back incentives during model year changes towards the end of the year.

Finding out if the specific car you want to buy has a customer rebate or factory incentive can be difficult; the information is no longer freely available to the public. Dealers and their staff may not be upfront with you about these types of programs because they can affect the amount of commission they receive.

How New Car Rebates Work

Customer cash rebates from manufacturers are provided directly to the car buyer to reduce the price of a new vehicle at the point of sale. Commonly a customer will elect to use the cash rebate as a down payment towards the purchase price of the new car.

1.9% OR $2,500 Customer Rebate on a New Charger!

Some new vehicles have a low-interest finance incentive and a cash rebate offer. Most of the time, unless otherwise specified, you have to pick one of the two. Before you decide, research to find out which offer will save you the most money.

2.9% AND $750 Customer Rebate on a New Sentra!

There may be new car programs from the manufacturer that offers low-interest financing and a customer rebate that can be used in conjunction. These types of programs are far and few between, but you can find them out there sometimes.

Factory to customer programs will vary by manufacturer. You MUST always read the fine print on special offers from a vehicle manufacturer or dealer.

Low-interest financing is advertised with a low annual percentage rate (APR), and down payments are often based on top credit tier consumers.

These offers will include legal advertising language like “with approved credit” (WAC) in the fine print and high down payments or short financial terms.

2.9%* Available on a New Ford F150
*W.A.C. 24-month term

Car buyers with less than perfect credit history may not qualify for these types of low-interest programs. If your credit is less than ideal, you may want to lean towards cashback or customer rebate offers.

Manufacturers may offer special lease programs; these lease programs are usually through their own finance companies. You can find these special lease programs on websites such as Edmunds. These programs are also known in the industry as sub-vented or subsidized leases.

Lease a new Lexus for $329/MO**
**$3,744 due at signing + first payment + $600 acquisition fee + fee + fee + fee

A subsidized lease is generally based on a residual value much higher than its actual worth at the end of the initial lease term, and the money factor is subsidized to below-market rates.

A special lease will indicate the security deposit, annual mileage allowance, down payment, term, and monthly payment. The monthly payment is based on the amount financed and the estimated down payment.

In short, don’t get caught up with the in-your-face low payment; always read the fine print. You may be able to negotiate a $0 acquisition fee and $0 down payment, but your monthly payment may increase dramatically to make up for the money you’ve arranged not to spend. Special lease programs are commonly targeted at car buyers with excellent credit.

How Factory-to-Dealer Incentives Work

Unlike customer rebates and incentives, dealer cash or factory-to-dealer incentives are only available to the car dealer for use in marketing their new cars to the consumer. These incentives are generally not advertised to the outside public, and sometimes even the salespeople employed at the dealership will not be aware they’re available.

Example: A dealer must sell 45 Chevrolet Camaro’s in April to earn an additional $500 per car.

Factory-to-dealer incentives are paid directly to the dealer once the vehicle is sold. Usually, these types of incentives are paid monthly or even quarterly. When it comes down to selling a car, most dealers will negotiate or even give up a factory-to-dealer incentive to keep you from buying a new vehicle from their competition. A dealer may take a $2,000 net loss to sell that 45th Camaro to gain $22,500 in bonus money from the manufacturer.

Manufacturers will run these programs at different times of the year. If you don’t research this information upfront or ask about these programs at the time of purchase, most dealers will not come out and offer them to you. Before contacting a dealership, you will want to do a little research to determine if the car you’re looking at has any available rebates or incentives.

Customer rebates and factory incentives vary by manufacturer and type of vehicle. Popular or high-demand cars are less likely to have any rebate or incentive.

I’ve had readers tell me they’ve inquired about dealer incentives with a dealership, and the sales managers were unaware of the incentive and had to look up the information themselves to see if it was true.

It is ultimately up to the dealer whether or not to negotiate some or all of this money. If you encounter a dealer that will not negotiate it, move on to the next.

How to Find New Car Rebates and Incentives Online

Instead of wasting time visiting each manufacturer’s website, you can find customer rebates and new car dealer incentive information at Edmunds. The information provided is the most current and up-to-date information from the manufacturers.

Once you select a car and (choose the options), they will present you with a picture of the vehicle. Under the image is a small link that says, “view incentives.” This link will show you all the available customer rebates, dealer cash, customer cash, special programs, and new car dealer incentives all in one place.

After picking a car, Edmunds will provide you with their very accurate True Market Value Price. The TMV shows you what others in your area paid for the specific vehicle you want to buy. So you can be an expert before ever stepping foot inside the dealership.

Manufacturers will make you pick an offer, low-interest financing, or customer cash rebate. The savings is generally about the same either way you go. You will want to look at your current needs to determine which route will benefit you financially.

On very few occasions, such as if the manufacturer is trying to move a certain vehicle, they may offer a combined offer. (rebate + incentive).

Always read the fine print on a dealer’s advertisement. They are required by law to provide detail on the offer they’re promoting in their ad.

About the author
Carlton Wolf is the author and founder of Auto Cheat Sheet.My name is Carlton Wolf, and I’ve been in the car business since 1994, both retail and wholesale. I created the Auto Cheat Sheet to better educate buyers about the deceptive sales practices many dealerships use nationwide. Please understand that not all car dealers are dishonest. However, you never know who you’ll be dealing with, though. I’m willing to share my knowledge and experience with anyone who listens. Keep in mind that I’m a car guy, not a writer.

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