New Car Rebates and Incentives Explained
If you are in the market for a new car. You will want to research and compare the current new car cash back rebates and finance incentives that may be available on the vehicle you're interested in. Some manufacturer programs include huge discounts from the vehicle's price and will provide you with large additional savings.
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 are highly advertised, and some are secret incentives you may have to do some digging to find. I will show you how to search them out, and use them to your advantage.
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, the dealer will most likely not offer them to you.
This section will provide you the information and 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 available.
Information in this section:
What are New Car Cash Back Rebates and Factory Incentives?
There are basically two different ways a manufacturer can provide financial support to dealers to help them market new cars to consumers and stimulate new car sales.
- Manufacturer to customer cash back rebates and incentives
- Manufacturer to dealer incentives
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
- Cash back rebates
Some manufacturers will also provide special programs such as military discounts, first-time buyer incentives, or other programs to target special customer niches and provide further discounts to help dealers sell new cars.
Manufacturer to Dealer Secret New Car Incentives
Another way manufacturers provide support to their dealers is in the form of factory to dealer cash incentives. Each individual dealership may or may not choose to negotiate this type of incentive with a car buyer. These types of programs are also called "secret incentives."
An example of a factory to dealer secret incentive would be, "For every new Nissan Sentra sold in the month of March, the manufacturer will pay an additional $750"* (*Dealer must sell a minimum of 25 units to qualify).
Finding out if the specific car you want to buy has a customer rebate or factory incentive available is key. Salespeople may not be upfront with you about these types of programs because they can affect the amount of commission they receive. You can avoid paying too much for a new car by calculating a dealer's true new car cost, and figuring a fair profit new car offer to present to a dealer before contacting a dealership.
How Do New Car Customer 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 both, 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 pick, do a little research to find out which offer will save you the most money.
If you're looking at a vehicle that has multiple programs available, use Edmunds free online Low APR vs. Cash Back Calculator to help you make an educated decision on which one to choose.
2.9% AND $750 Customer Rebate on a New Sentra!
There may be new car programs available from the manufacturer that offer a combination of 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 vary by manufacturer. You MUST always read the fine print on any special offers from a vehicle manufacturer or car dealer. Low interest financing offers advertising a low annual percentage rate (APR), and low payments are normally based on top credit tier customers "with approved credit" (W.A.C.) combined with large down payments or very short finance 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 perfect you may want to lean towards cash back or customer rebate offers. You should never apply for a car loan or any other kind of credit without knowing your credit score, or what's been reported on your credit report. If you don't know this information. Read my section on how to get your credit report and score online.
Manufacturers may offer special lease programs also, these lease programs are usually through their own finance companies. You can find most of these lease programs listed on websites such as Edmunds. These programs are known 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 with a residual value that is much higher than its actual worth at the end of 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 negotiated not to spend. Special lease programs are commonly targeted to car buyers with very good credit.
How Do Manufacturer 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 not normally advertised to the outside public, and sometimes even the salespeople employed at the dealership will not be aware they're available.
Dealer must sell 25 Camaros in April to earn an additional $500 per car.
Factory to dealer incentives are paid directly to the dealer once the vehicle is sold. Normally these types of incentives are paid on a monthly or even quarterly basis.
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 car from their competition. A dealer may take a net loss of $2,000 to sell that 25th Camaro to gain $12,500 in bonus money from the manufacturer. Knowing how to find these kinds of new car incentives is key in getting you the lowest price on your next new car.
How to Find New Car Rebates and Incentives Online
Instead of wasting time visiting each manufacturer's website. You can find customer rebate and new car dealer incentive information at Edmunds. The information provided by Edmunds is the most current and up to date information available from the manufacturers.
I've also provided you with this link to all the Current Rebate and Dealer Incentive Information. This link allows you to select by manufacturer so you can view all the available customer rebates, dealer cash, customer cash, special programs, and new car dealer incentives all in one place.
After picking a car and selecting your options, Edmunds will provide you with the True Market Value (TMV). The TMV is the average price people in your area are paying for the specific vehicle want to buy.
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Recommended Sites for Online Car Shopping
Edmunds and TrueCar are the quickest way to compare new car prices in your local area. These online sites will provide you with free, no-obligation price quotes and the discounts you receive will give you confidence on your next new car purchase. Walk away from the dealership knowing you received a good deal, not hoping you did.
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