How Dealer Incentives Work

Vehicle manufacturers offer incentive programs to boost lagging sales or to reduce inventory on certain models. Incentives can take the form of either direct cash back or low-rate financing offers. Low financing and manufacturer rebates are passed on to the buyer, but dealer incentives are given to the dealer. It is up to them to decide if you will see any of that or not. Manufacturer rebates and finance deals are passed to the buyer, while dealer incetives are given to the dealer. Not all dealers will pass this on to the consumer. These incentives can range anywhere from $500 to $2,000, but may be different for different areas, and may not always be offered.

If you have the freedom of timing when you purchase a vehicle you have a better chance of being able to take advantage of incentives. Often they are offered during late summer and early fall because dealerships are eager to clear their lots for the new models coming in. Also, keep in mind that vehicle models have “life cycles” which run about four years and then manufactures will debut a redesigned model; this is another opportune time to secure a potential incentive. If you learn when the cycle is going to be running out and have flexibility you can cash in on a valuable incentive. An incentive offered by one manufacturer sometimes could lead to copycat incentives by competitors. This can work in your favor if you want to purchase a similar vehicle that does not have an incentive at the moment. Also, incentives usually run for one or two months because they want you to rush out on buy right away, but you do not necessarily have to do that because they often reappear and sometimes they even exceed the previous offer.

Customer incentives are ones advertised on the radio and television. These sorts of incentives come in the form of cash or a reduced financing rate and even sometimes a combination of both. Customer incentives tend to be more publicized and often are offered to certain types of buyers such as first-time buyers, college grads, or repeat buyers.

If an incentive is something you can pursue you might need to decide if you should take the cash back or the lowered financing rate. Next, you should add up the entire price of the vehicle at the special incentive loan rate. If the loan costs less with the lower financing option than with the cash back then that might be the choice you want. However, you might want to have a larger down payment; you can use the rebate money for this option. Don’t forget to calculate what you will pay overall for the vehicle as well as monthly so you can decide which works best. Remember that the special finance rates often only last 24-36 months so it might save you money overall, but it can raise your monthly payments because of the shorter term.

Dealer rebates is money given back to the dealer from the manufacturer to move specific vehicles. These are more difficult to spot, but you can still take advantage of them. One way is to check the date the vehicle was actually manufactured on because if it has been on the showroom for six months or more an incentive might be placed on it in order to move it. The cost of keeping the vehicles on the lot for an extended period of time is why they will begin to offer these incentives.

Incentives can be taken advantage year round, but if you have some financial freedom and/or flexibility it is much simpler to get an incentive on a vehicle you want to purchase. If you do some homework you can save yourself quite a bit of money by taking advantage of dealers’ and manufacturers’ needs to reduce inventory and get rid of slow sellers.

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