Rebates & Incentives

When shopping for a new car, you will notice that the amount you can spend will limit the amount of cars you will be able to afford. Two ways to grab that new car that would normally be out of reach are with rebates and incentives (low-interest financing or APR). Most often rebates and incentives are used to sell cars that aren't in high demand. Because the automotive industry is struggling, you will notice that rebates and financing deals are more available than ever. If you don't believe me, check out all of the latest cash rebates and low-interest financing offers on every make and model in our Rebate Center.

It used to be nearly impossible to find deals for cars in high demand like luxury cars and hybrids because they practically sell themselves. Not anymore. The current recession has changed everything for the consumer, dealer and manufacturer. It comes as no surprise that sales are down and manufacturers and dealers are trying to unload their inventory. Even though we are in the midst of a recession, now is the time to buy!

Not only are GM, Ford and Chrysler offering insane rebates on their fleets, but Honda, Toyota, Nissan and Volkswagen are also trying to get rid of their inventory. Even though times are tough, you can feel confident knowing that the odds are stacked in your favor no matter what car you desire.

What is a rebate or incentive?

A rebate is a reduction in cost that is refunded to you by the manufacturer after the purchase. Usually, a rebate is only offered to buyers who pay cash for their new cars (or bring their own financing). The good news is that there are generally no eligibility restrictions on rebates – if you can pay for the car, you'll get the rebate. Note: in many states, you'll pay taxes on the full purchase price, not the purchase price minus the rebate.

An incentive is a reduced lease or finance interest rate, offered to you by the manufacturer's financing division. Finance/interest rates are also referred to as an annual percentage rate (APR). The bad news is that the incentive interest rates are subject to eligibility restrictions, meaning that if you have poor to mediocre credit, then you won't be eligible for the best rates. In these cases, you might be better off getting a loan somewhere else and taking the cash rebate from the dealer (if there is one).

Sometimes, rebates and incentive interest rates are combined – for example, $2000 cash back plus 2.9% financing for 48 months. Again, the incentive interest rates are limited to “qualified buyers.” How can you tell which is better – a rebate or low-interest financing? Fortunately for you, we have gone ahead and created a Cash Back vs. Low APR Calculator that will help you figure which is the better deal for you.

Tough times? The government is here to help

It's no secret that the current recession has both the consumer and auto industry reeling. Whether it's a corporate giant filing for bankruptcy or the scarcity of credit, new car sales are hurting and the government is doing all it can to revive the industry. That's why Uncle Sam is offering a tax deduction on all new cars up to $49,500. Basically, you would deduct your state sales/excise tax from your Adjusted Gross Income, which depending on how much your new car costs and what your state sales tax is, could be several thousand dollars. This incentive was part of the stimulus package and will expire on January 1, 2010.

• First Things First

  One of the most important things you need to keep in mind during the negotiation process is to negotiate the price of the car before you mention anything about the rebates or incentives. Once you have successfully negotiated the price of your car, then you can figure out the rebate, which again is YOUR money that you will deduct AFTER the price is negotiated.

• How to find Rebates and Incentives

  You could spend all day going from one manufacturer's website to another looking for the latest rebates and incentives – or, you can find all of the latest rebates and incentives for all major makes and models in our updated Rebate Center. While looking for bargains, you will notice that the most lucrative deals can be found on the previous year's model. If a dealer has both a 2009 and 2010 Nissan Altima, you can bet that he will be doing everything he can to get rid of the 2009 model. Because fewer people are buying cars, dealerships are stuck with excess inventory making way for cash rebates and low APR's.

• What is the Most Common Rebate/Incentive?

  Cash rebates from the manufacturer are the most common and least complicated. Cash rebates are money that you get back from the manufacturer after the sale. Here's what you can do with them:

  • Apply Them to the Purchase: If you have $2,000 for a down payment and the rebate is $750, you can combine the two and put $2,750 toward the negotiated price.
  • The Check is in the Mail: If you already have enough money to put down, you can choose to have the manufacturer mail you the rebate after the purchase is complete.
  • No Money Down?: You can use the rebate as your down payment if you don't have enough cash.

• Other Types of Rebates: In addition to regular rebates, there are several different types of rebates offered to special groups. Here are four examples:

  • Loyalty: Some manufacturers offer loyalty rebates to returning customers.
  • Conquest: The opposite of a loyalty rebate. Conquest rebates are offered by a manufacturer to lure you away from the manufacturer of your current car. For example, if you currently own a Toyota, General Motors might offer you $2,000 to buy GM instead of Toyota.
  • Military: Many manufacturers offer special rebates for members of the military with proof of service.
  • Student: Often, manufacturers offer rebates to students who are buying a new car for the first time.

  BOTTOM LINE: If you plan to accept a manufacturer's rebate, don't let the dealer add that during the negotiation. A rebate is your money from the manufacturer (not the dealer) and is deducted once the price of the vehicle has been agreed upon. The current recession has created a unique window of opportunity for those hoping to find rebates and incentives. If you can find an older model on the lot, insane deals are sure to follow.