What is an incentive?

All incentives are price reductions offered by the factories either to increase sales or to reduce excess inventory.

Incentives can take the form of cash back, low-rate financing, or a financing deal AND cash on the same model.

Cash incentives can go directly to the consumer or to the dealer. Some go either to the dealer or the consumer, and that can vary regionally; it can be left to the dealer's discretion, or the discretion of the regional manager. Rebates vary significantly by region.

Any national consumer rebate is the MINIMUM rebate you are eligible for. Other local, less publicized incentives may exist. Some national programs will not apply to all regions.

Best time for incentives?

For decades, new car model season arrived in fall, but now, new model year basically lasts all year long. Late summer/fall is still a time when dealers clear lots for the new models, and a good time for incentives. "Carryover allowances," special model-year-end allowances given to dealers or consumers to clear out last year's inventory, are not the rule anymore. Note: these allowances don't kick in until the dealer actually has next-year's model on the lot.

Because new model season lasts all year, learn the 'life-cycle' of the particular model. If a car's due for a major redesign you may see incentives before or when the new-generation or replacement model debuts. Some models have a 4-year cycle between complete redesigns, with a 'freshening' every couple years, but each maker and model is on a different schedule.

Incentives tend to work on the domino principal, leading to copy-cat actions between competing makers and models. A rebate on a Chevy truck can lead to similar deals on a rival Ford or Dodge model.

Most rebates carry an expiration date--usually in effect for 1-2 months. When an incentive program expires, they don't necessarily renew or change them right away.

What exactly is a customer incentive?

These are generally the incentives advertised on TV and radio, but to make sure you're informed, always check AutoIncentives.com before you buy.

Customer incentives usually come as a choice of either cash or a reduced financing rate--or a combo of both. Customer rebate tends to be more publicized.

They can be given to special kinds of consumers; college grads, first-time buyers, or repeat buyers, etc.

They can be nationally-set, but are more often regionally-specific.

What exactly is a dealer rebate?

A dealer rebate is money given back to the dealer by the manufacturer to move certain cars.

Dealer incentives are often offered in tandem with other incentives that depend on the regional manager's specific judgment call.

A tip: check the date the vehicle you want was actually manufactured. If it's been in the showroom for 6 months or more, some kind of dealer incentive may be placed on it. Dealers pay money to keep cars on their lot (they are financed through a bank) especially after a car's been on that lot for more than three months, and they have an increased incentive to sell.

Any other kinds of dealer incentives?

Occasionally, there are special programs in place that offer dealers unusual incentives.

A manufacturer may want to help a new dealership get on its feet, and establish a customer base, and will offer them special sales rewards.

The factory may want a dealership to take more inventory, and offer incentives to do so.

Some programs give a dealer X amount of dollars for selling a certain number of cars by the end of the month, or even more money per car if they reach a certain sales target. This encourages dealers to offer lower prices at certain times of year or month to reach that targeted sales point.

All of the above incentives apply ON THE DAY OF DELIVERY. Buying the vehicle on factory order could jeopardize the incentive, if it expires before you actually get the car. Ask...

Leasing and Manufacturer's Rebates

Before you go shopping, find out if there is a rebate on any of the models you're considering leasing. If you go through a third party leasing company, the rebate will be applied to your down payment. If you go through a manufacturer's leasing subsidiary (e.g. Ford Credit, GMAC, Mercedes-Benz Credit), the rebate is typically added to the residual value of the vehicle. Either way, you get the rebate, either at the beginning of the lease or at its end. Beware if you are told that leases don't qualify for the rebate. Rebates apply whether you're buying or leasing.

A leasing deal with a rebate should be written as follows: the dealership adds up the negotiated purchase price, applicable taxes, license fees, document fees, etc. into a grand total, the capitalized cost. Then your capitalized cost reduction (down payment), including the rebate and any cash you submit, is subtracted from the capitalized cost. The resulting balance is your gross capitalized cost. Your lease payment is determined by the difference between the vehicle's residual value and the gross capital cost. A lower gross capital cost means a lower monthly payment for you. Make sure the rebate goes from the factory to you, not from the factory to the dealer.