Buying a car from a dealer can be a confusing―and exasperating―experience (but see our tips for how to avoid showroom anxiety). So many choices, so many decisions to make. Add bewildering manufacturer incentives on top of all this, and it's enough to make you just want to call the whole thing off.
Clear up some confusion by taking a closer look at manufacturer incentives.
Manufacturer incentives come in two basic categories: customer incentives and dealer incentives. Pay attention to both categories, because you can benefit financially from either group.
The most common customer incentive is the cash rebate from the manufacturer. Nothing gets people running in like the promise of cash back. You can even use it for your down payment, softening the impact of your huge purchase. It's especially helpful when you don't want your significant other to know you've bought a car until it's sitting in your driveway.
Sometimes an incentive will be available only to a very specific type of
customer. "Loyalty" rebates, for instance, are given to repeat customers. Manufacturers may also give incentives to first-time customers, college students or military members.
Manufacturers may throw in free routine maintenance, gasoline, auto insurance, and extended warranties, too. Be sure to check the ads for deals.
If you have spotless credit, you might qualify for another popular incentive, a low interest-rate loan or lease. These deals are usually only offered in shorter lengths, such as 36 months or less. This means higher payments, so be prepared to pay.
Dealer incentives usually occur when cars aren't moving. The manufacturer sweetens the pot for the dealer to reduce the overall inventory at a dealership. The manufacturer might also reward the dealer for selling the model of car that's in overstock, or for stocking more of a particular make.
Dealer holdbacks refer to the small percentage of a car's invoice price that a manufacturer returns to the dealer to increase dealer profits. Thanks to the holdback, you can negotiate down to the invoice price and still be assured that the dealer's making a profit, even if they tell you it's killing them.
Where can you find out who is offering what incentive? A good
place to start is Automotive News, which covers the auto industry. The information is available in magazine form as well as online. To find other online sites, go to a search engine, type in "manufacturer incentives," and dozens of choices containing the latest deals will appear.
Customer incentives are much easier to track than dealer incentives. Also, one dealer in your town may have an incentive while another won't.
Rebates have a short shelf life. Shop and be prepared to act when you see a deal.
So how can you benefit from all this knowledge?
Just because you already have a cash rebate, a low percentage loan, and an extended warranty doesn't mean you can't negotiate an even better price on a car. The dealer still has room to wheel and deal.
This is especially true if you happen to know that the manufacturer is pushing the dealer to move a car. Thanks to the incentive, the dealer has more room to maneuver and still make a profit on the deal.
But don't be greedy. Although a dealership may be willing to give you a percentage of its incentive, they won't give you the whole thing.
Lastly, when dealing with manufacturer incentives, keep your expectations in check. Sure, it would be nice if that hot-selling, flashy car you've been eying would come along with a juicy incentive. And it might ... but it's not likely. More often than not, incentives are given by manufacturers to encourage the sale of a car that just isn't flying off the lot.
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