Must-Have Dealership Incentives

Taking advantage of dealership incentives can help you to get the best deal possible on a new car. The hard part is knowing which incentives are available and how you can get them.

Since dealerships can profit from your lack of knowledge, it's important to do as much research as possible before you head out to buy a new car.

Below is a list of dealership incentives that you should always be aware of, along with tips for other hidden incentives you might need to pry out of that secretive salesman.

Top 5 Dealership Incentives

Manufacturers often give dealerships incentives to bring in new customers or move their inventory to make space for next year's models. As the buyer, you can take advantage of incentives to get a lower purchase price on the car you've been eyeing.

A few incentives that you should always be aware of include:

• Customer incentives:
  • An offer from the manufacturer directly to the consumer.
  • Can vary depending on region or dealership.
  • Usually will consist of:
    • Cash-back rebates.
    • Low-interest financing options.
    • Lower payments for leased vehicles.
• Factory-dealer incentives:
  • Given to the dealership from the manufacturer in order to:
    • Generate sales for specific models.
    • Move old inventory before new vehicles arrive.
    • Reach end-of-month or quarterly sales goals.
  • Dealerships are not required to pass these savings off to consumers, but if you're aware of these incentives, it can help you to negotiate a better deal.
• Sales incentives:
  • Given to dealerships from the manufacturer only when high sales goals are reached.
  • When dealers near these sales goals, you can often negotiate a lower price.
    • Since this can be hard to determine as a consumer, it's a good idea to request quotes from multiple dealers for the same model vehicle.
    • If one quote is much lower than the rest, it might be because they're getting close to a sales incentive.
• “New dealership" incentives:
  • Given to new dealerships from the manufacturer to lower prices in order to attract new customers.
    • If there's a new dealership in your region, visit them in person to see if you can negotiate a better deal than the one that's advertised.
• Dealership holdbacks:
  • An amount of money given back to the dealership after the cost of dealership inventory is paid to the manufacturer.
    • Usually a predetermined amount, generally ranging from 2% to 3% of the manufacturer's suggested retail price (MSRP).
    • Dealerships often list new car invoices without reflecting the holdback amount.

Dealer Incentives to Ask For

Some incentives, such as those offered from the manufacturer directly to the customer, aren't too hard to find as long as you do a little research. Others incentives can be more difficult—particularly those that are given directly to the dealership.

For you to get these savings, you'll be cutting into dealership profit. Because of this, dealerships are reluctant to make these incentives common knowledge. But, if you ask, you may be able to save yourself some money by negotiating a portion of these incentives.

Here are a few common incentives that will require further inquiry:

• Special incentive program availability:
  • Money given to the dealership to move slow-selling vehicles.
  • Since the dealership will profit more by selling these cars to you without the incentive (reduced price), you'll need to ask to the salesman for specific overstocked models that may qualify.
• Special plans:
  • Offered to specific segments of the population and may include low interest rates or cash back offers.
  • May or may not be advertised.
  • Ask the salesman or manager if a special plan is available for a specific model vehicle, particularly if you are:
    • A member of the military.
    • A retired veteran.
    • A school teacher.
    • A first-time buyer.
    • A repeat buyer from the same manufacturer.
    • A recent college graduate.
• Specialized car incentive programs:
  • Common incentive programs include:
    • A discount for vehicle exchanges, know as VEP.
      • Allows you to upgrade to a newer vehicle at a lower price by selling your car back to the dealership.
      • Helps the dealership increase stock of quality pre-owned vehicles.
      • Ask the salesman or manager if you own a vehicle that qualifies.
    • Cash back bonuses or rebates for hybrid or electric vehicles.
    • Special rates for customers returning leased vehicles.
  • Incentive programs can vary on a day-to-day basis, so be patient and ask around.
• Holdback percentage:
  • Since this can be a sneaky way for dealerships to increase profit margins, savings won't often be offered to the consumer.
  • The salesman may or may not profit from the higher invoice price, so ask the dealership manager to see if you can subtract a portion of the holdback amount from the overall purchase price.

Other Hidden Dealer Discounts

Often, the salespeople at the dealership are offered incentives themselves to meet quotas or to move slow-moving vehicles.

The salesperson may not offer these incentives or discounts to buyers, but you may be able to negotiate a lower purchase price, better financing, or other deals by asking the dealership manager for hidden discounts or rebates.