How Do Car Incentives Work?

You’re thinking of buying a car, and obviously you want the best deal you can get. The first, and sometimes the only, aspect prospective buyers may think of is price. And it’s no wonder – that’s your hard earned money you’ll be spending. However, savvy shoppers should also consider car incentives and rebates to get the best deal possible.

Incentives and rebates are terms that are often thrown around, but do you really understand what they are and how you can use them to your advantage? Car dealerships often offer these types of discounts to entice potential buyers to purchase vehicles from their particular business or to spur sales of cars that are not selling well.

The most common forms of rebates and incentives are cash rebates, low interest financing, and special leasing options, which are explained below.

Cash Rebates

Many dealerships offer cash rebates, also known as cash back offers. Essentially, after you buy a car, the dealer may give you some of your own cash back. The amount can range from a several hundred to several thousand dollars. Most times, this “cash back” is applied to the purchase price of the car, but buyers can sometimes choose to keep the rebate for themselves. It is the equivalent of a coupon for your car.

When you decide to purchase a car and a rebate is offered, always negotiate for the price that you can afford to pay before a rebate is applied to the price. This helps ensure that the final price is truly within your pre-determined budget.

You can get a car rebate on both new and used cars. However, used car rebates are less common and tend to be a lot less in amount. Either way, a rebate makes financial sense – you save money on a large purchase.

Low-Interest Financing

A common incentive offered when purchasing a car is low-interest financing. This means that car dealers and manufacturers have partnered with lenders to offer special loans to those who want to buy a certain car. The interest being offered can be at any rate, but to entice car shoppers they are often advertised as zero percent, but typically range between zero and five percent.

Not everyone qualifies for low-interest financing. Generally, you need to have excellent credit; therefore, it is recommended that you get pre-approved for a loan before you decide to go car shopping. This allows you to compare the low interest rate that the dealership offers you to the one for which you have been pre-approved.

Note that the interest rate you are offered may be linked to the length of the loan term. Do your math to determine if you are really getting a great deal.

Special Leases

Car manufacturers can also offer special lease programs through their financing companies. These leases are a common incentive and can mean that you will enjoy a low monthly payment with little to no money down. But you need to pay special attention to the fine print.

You most likely will not have any wiggle room when trying to negotiate with a lease special. And although your monthly payment will appear lower, you may need to pay more in the long run. For example, the details of your special lease may require you to have a certain length of your lease, and you may be allowed only a certain number of miles for your car. Each of these options can increase the total cost of your vehicle. Make sure you do all your calculations to ensure that you are getting the deal that you appear to be getting.


Most times, car dealers will offer you either low-interest financing or a cash back rebate, but rarely both. So what do you do? Before making any financial decisions, always perform your own research to understand what works to your best advantage, and don’t be swayed from your stance. Being an educated consumer is the best way to get the best deal. That way, when you drive your well-priced car off the lot, you’ll be wearing the biggest smile of all.

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By Chris Countey

Chris Countey is a blogger and digital marketer for the auto industry. He covers a variety of topics including technology, trends and advice for companies like Oxnard Hyundai.

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