What Is a Vehicle Rebate?
A vehicle rebate is an offer that gives the buyer a fixed amount of cash in exchange for the purchase of a new vehicle.
In general, there are three types of rebates:
- Manufacturer's rebate: Often referred to as a factory-to-consumer rebate, these cash-back offers come directly from the automaker and may only be offered in certain regions.
- Dealership rebate: Offered as an incentive from a specific dealer only.
- Government rebate: Most of the time, rebates through the government are given to consumers for certain high-efficiency or low-emission vehicles. The rebate may be a cash offer or a tax credit.
No matter who is offering the rebate, they almost always work the same way—you get cash for the promise to pay for the purchase of a new vehicle.
Why Rebates Are Offered
Rebates from the manufacturer can be offered to the consumer for several reasons, including:
- To stimulate sales.
- A particular model car or truck that isn't selling may have a cash-back rebate to increase sales.
- To move last year's inventory.
- When a new model of a vehicle arrives at a dealership, old stock often needs to be moved quickly.
- To provide an incentive to specific segments of the population, such as:
- Repeat customers.
- Recent college graduates.
- Members of the military.
- First-time buyers.
How Rebates Work
Not to be confused with vehicle incentives, rebates have little to do with financing or the overall cost of a vehicle at the time of purchase. Instead, rebates give the consumer cash in exchange for their purchase. How you decide to use the rebate is up to you.
Though dealerships may often mislead you (on purpose or not), you may decide use your rebate in any of the following ways:
- Keep the rebate.
- The dealership will write you a check for the amount of the rebate being offered.
- Apply the amount of the rebate toward the down payment for the new vehicle you're purchasing.
- If the offer is for bonus cash, you can use the rebate and apply it to the finance price for a leased vehicle.
Some dealerships may require you to purchase a vehicle through their own financing services for you to receive a rebate offer. Read the fine print of the contract so you know the details before you begin to negotiate.
Finding & Using Vehicle Rebates
Rebates for a particular model of vehicle are most often offered according to region or through a specific dealership. Because rebates are not usually offered nationally, it can be hard to determine which rebates are available for vehicles in your area.
Use these tips to find rebates and get the best deal once you've found a vehicle you'd like to purchase:
- Search each manufacturer's website.
- Some automakers will advertise rebates on vehicles by region through a search tool on their website.
- Do additional online research.
- Some websites—like Forbes.com—provide the best rebates for the current month.
- Call the dealer for a price quote.
- Often the dealer will tell you about any rebates as an incentive to get you to come look at the vehicle in person.
- Negotiate the sale price before you mention the rebate.
- The rebate has nothing to do with the overall price, no matter what a car salesperson tells you. Don't be tricked into applying a rebate to the full price of a vehicle. Negotiate the best price you can and deduct the rebate from that.
- See if the rebate can be used in conjunction with another incentive.
- Extra incentives, such as special financing and lease options, can be combined with cash-back rebates. If it's possible, you'll get a better deal if you use both. Qualifying restrictions often apply based on your credit score.