What is a Vehicle Rebate?

In the world of consumer marketing, vehicle rebates are a little slice of heaven. Initially conceived as the voluptuous big sister to the coupon, vehicle rebates are all about cash. By definition, a rebate returns a fixed amount of money to a buyer for the purchase of a particular vehicle. It taunts and temps, like a fresh piece of cheese on a shiny new mouse trap, and it delivers.

In the world of car buying, the rebate comes in many forms. We have the manufacturer’s rebate, particularly popular among the car dealers because the manufacturer pays. We have the car dealer rebates, not so popular among the dealers because the money comes from their bottom line, and even the federal government now offers a rebate, in the form of tax credits, for certain high mileage, low emission vehicles. All these rebates do the same thing. They promise money back later for money spent now, and they help sell cars.

Vehicle rebates have become a popular way to entice buyers because they make a clear pledge with a dollar amount. The mantras have become familiar. “With this car comes a five thousand dollar rebate!” “This particular vehicle qualifies for the twenty-five hundred dollar rebate.” “For you today, sir, I can get you a seventy-five hundred dollar rebate on this here particular automobile.”

It all sounds wonderful, a good whack against that formidable price tag to drive off the lot in the car of your dreams, but each and every vehicle rebate holds special circumstances for each and every dealer, and no dealer is in the business to lose money. Rebates are the dealer’s bait and the buyer’s magic beans. The rebate is the initial stake in a game in which the dealer holds all the cards. Yes, the rebate helps, but the buyer must recognize that the rebate facilitates the sale for the dealer, and that often the rebate itself provides little savings, if any, in the overall price of the vehicle purchased.

Sure, you’re probably asking yourself, “Isn’t five thousand dollars off a thirty thousand dollar truck a good deal?” Yes, it is. But if that thirty thousand dollar truck is financed over sixty months with an average interest rate at ten percent, that five thousand dollars has netted the dealer over twelve thousand dollars in interest payments. So if you were presented with a deal in which someone gave you five dollars and you gave them twelve dollars back, would you take it?

Vehicle rebates have their function in the market place, but make sure you use them and understand them wisely. Make sure the vehicle rebate is used against the final sale price of the vehicle and not as some reward check for paying full price. The object of any vehicle purchase is to secure the lowest possible sale price and to know you can comfortably afford that price. Be doubly careful when financing a vehicle. A vehicle rebate should be used to reduce the amount financed, not serve as a down payment or a way to qualify a buyer for a purchase. People have gone bankrupt on the generosity of a rebate. Vehicle rebates sound like free money, but free money has a price.