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What are Car Dealer Incentives?

by Autobytel Staff
May 20, 2011

Car incentives come in a rainbow of varieties and labels. Probably the most popular and the most familiar are the rebates. We see the numbers plasters across newspaper automobile sections and flashed across our television screens. “Factory Rebate!-$1000 off of MSRP!” “Dealer Rebate!-$5000of of MSRP!” But what are car dealer incentives really, how do they help and how do you find the best new car incentives and rebates?

The Many Types of Vehicle Incentives

A primary incentive, the factory rebate, refers to money coming from the manufacturer to the dealer to help the buyer lower the sale price of the vehicle. Manufacturers can specify a first time buyer rebate, a recent graduate rebate, or a rebate for those in the military. It may be a rebate for anyone willing to purchase a new vehicle. A factory rebate is like a coupon in the grocery store. The buyer never sees the rebate money. The dealer may never see the money either. It may be used to help his account with the manufacturer, but the rebate will appear on the sales contract as a credit to the buyer.

A dealer rebate comes from the dealership itself and is a car dealer incentive. As an independent business, a dealership can sponsor any incentive it wishes, and most will sound very much like those from the manufacturer, reducing the final sales price of the purchase with the reduction coming from the dealer.

The cash back rebate works much like the mail-in coupons at the grocery store. The buyer pays full price, and a check arrives for the rebate amount. The same conditions apply in the automobile business. A cash back incentive means the buyer pays full price, and a check for a fixed amount arrives from the manufacturer.

Another incentive offer is called bonus cash, which sounds like something that should happen on a game show or with the lottery franchise, but bonus cash is another name and another sum that accompanies any cash back offer.

Incentives can also be offered in the form of financing. Low APRs, zero percent financing, and re-establishing credit may all be used to lure customers onto dealer lots and begin the purchasing process. Financing incentives tout great deals, but they depend on the buyer’s credit rating and ability to pay. Financing incentives demand a great income and a great credit score. Few buyers ever qualify for these incentives.

Cash rebates and financing incentives may also be combined by a particular manufacturer on a certain model. Incentives for a Ford Taurus will differ from incentives for a Chevrolet Camaro, and both will be different from the incentives offered byToyotaon a Prius. Each deal will be unique and will carry its own conditions regarding the loan amount, the length of the loan, and the interest rate applied to that loan. 

In the wild kingdom of automobile dealings, incentives and rebates are the bait to seduce buyers. Incentives and rebates figure into the marketing of a vehicle, and consequently will figure into the sale price. A few thousand dollars saved against ten of thousands spent must ultimately be judged by the buyer as the incentive that makes the deal.   


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