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Car Buying Incentives Can Reduce Sticker Shock

Aug. 25, 2017
Auto Loans, Loans
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Buying a car is rarely easy. But factory-to-dealer incentives can take some of the sting out of the process — and put some cash back in your wallet — assuming you know how to find them and apply them to your purchase.

Car manufacturers offer dealerships these two types of special car buying incentives to help boost sales on certain car models:

  1. Rebates: Return a fixed amount of money to a buyer for the purchase of a particular vehicle.
  2. Low-interest financing: Provides a low annual borrowing rate when you buy a car.

Another type of incentive is in the form of leasing specials like low monthly payments or reduced down payments. But here we’ll focus on purchase rebates and low-interest financing.

Why — and when — automakers offer incentives

Rebates and low-interest financing are offered by auto manufacturers to spur sales of certain slow-selling cars. This can be because manufacturers want their latest models to sell better than their competitors’ or to incentivize sales of their older models that are moving slowly off the lot.

Car buying incentives tend to increase whenever automakers want to make room for new models, especially toward the end of the year. And dealers often have sales quotas to reach every 30 days, so incentives may be offered more heavily at the end of the month. Holidays are also popular times for auto sales events and often coincide with many incentive offers.

Where to look for offers

Be sure to research purchase incentives before car shopping, as they’re not always clearly advertised at the dealership.

These offers can make a big difference in what car you look for. For instance, if you’re choosing between two closely priced cars, finding out one has a $2,000 rebate could make your decision a lot easier.

To view incentives, go directly to the manufacturer’s website. Look for tabs with terms such as “current deals and offers” or “current offers and leases” to see a summary of offers on different models. Be sure to read the terms and restrictions carefully.

You’ll also need to input your ZIP code, since different regions of the U.S. have different offers.

Let’s take a closer look at each incentive to see what deals you are likely to find:


After you’ve purchased your new car, you can get a lump sum of cash from the manufacturer in the form of a rebate. Most car owners choose to apply this money to reduce the sale price of the car or cover all or a portion of the down payment. Theoretically, you can have the manufacturer send you a check and use the money as you wish, but this rarely happens.

What to know

Incentives have restrictions: Some require you to be a recent college graduate or a member of the military. There are even “conquest” incentives, for those switching car brands, and “loyalty” incentives, for those getting a new car within the same brand. Make sure you qualify before you’re at the dealership. When in doubt, you can call the finance manager at a dealership to see if you qualify before going in.

You can still negotiate: You don’t need to buy the car at the dealership’s advertised sticker price to get the rebate. Negotiate your lowest price and then deduct the rebate from that amount.

Low-interest financing

A good credit score could get you lower interest rates on your monthly payments if you purchase a car with a low-APR financing incentive. People with top-tier credit could receive rates as low as 0%. Good credit scores will typically qualify you for 1% or 1.5% APR.

Paying 0% to 1.5% is far below the national average interest rate, which is about 3.1%, according to The New York Times.

Say you buy a 2017 Camry without a low-interest incentive, at $23,000. With a 20% down payment for a 60-month loan, you’ll pay about $1,486 in interest with the average 3.1% rate. By scoring just a 1% APR, you pay only $471 in interest — a savings of $1,015.

What to know

Credit score matters: Not everyone will be eligible for this incentive, since it’s based on credit score. But there are auto loans for people with lower credit scores.

It’s always a good idea to get preapproved for a car loan before heading to the dealership, so you can easily compare other interest rates to the dealership’s and choose your best option.

Additional tips

Incentives are usually offered monthly. If you have your heart set on a new car with no current offers, consider waiting a few months to see if any deals pop up. While new deals arrive fast, the downside is that they also expire quickly.

Manufacturer incentives should be available at any regional dealership. These deals aren’t exclusive to any one dealership, as long as it’s in the participating region, so be sure to shop around. But dealerships sometimes have offers specific to their location, so ask the dealer if it’s offering any site-specific rebates on top of the national ones.

Beware of dealers pushing extra purchases to “qualify” you for incentives. Finance managers will sometimes tell customers they have to buy an extended warranty to “qualify” them to receive customer cash back. This isn’t true. If you qualify for the incentive, you don’t need to buy anything extra. If a salesperson relentlessly pushes extra purchases on you to get incentives, walk away.

Updated August 25, 2017.

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