With so many incentives, rebates and strange fruit baskets being given out today,
buying a
car can often be a confusing endeavor. In order to help sort this melee, we break down the
difference between factory incentives and manufacturer's rebates when
buying a new
car.
Buy a Car Using the Factory Incentive
Factory Incentives are the kickbacks
dealers receive for selling a specific car
that may not be selling well. These are technically secret agreements the factory makes with the
dealer outside of any customer rebates and arrangements. However, they are often used as a tool to
lower prices and make a car more attractive to the
new car buyer.
When buying a car, you always want to inquire whether or not the
dealer is
receiving a factory incentive for selling it. If so, you may be able
negotiate buying a
car from the
dealer at a reduced price from a portion of the incentive.
Current incentives can run anywhere from $500 to $6,000, which can assist greatly in lowering the
price of the car. Ultimately, the
dealer wants to sell the vehicle, his manager
wants him to sell the vehicle and the factory wants him to sell the vehicle, so he should have no
qualms about helping you out in this regard. He gets a cookie, you get a cookie, everyone's happy.
Auto Buying with a Manufacturer's Rebate
Manufacturer's rebates are usually handed out in lieu of low interest financing. How do you know
which is more advantageous? Do the math. Do the interest payouts with the rebate exceed the lower
interest payouts without it? I wish I had a pie chart for this. Things are always easier to see
with pie charts.
It's important to make this calculation, because a
dealer may try to entice you to
an up-front rebate when really the financing option will make you more money in the long run. On
the flip side, in some cases having the capital immediately would net you more based on investments
or simply by being more than what the extra interest will cost you. Rebates can come in two forms,
from a third party subsidiary or off the value of the car itself. Either way, you're getting a
discount on your purchase, whether it be off the lease payment or the cost of purchasing the
vehicle.
So What's the Difference When Buying a Car?
The main difference between the two terms is factory incentives are not disclosed to the buyer
while manufacturer's rebates are a selling point found on billboards, commercials and foaming out
the
dealer's mouth. In a way, you have to look at factory incentives as a
commission, like the one the guy at Radio Shack makes for following you around the store all day.
Nowadays, with the economy headed toward oblivion and the pressure to sell cars rising faster every
day, you see less and less of the factory incentives and more customer incentives and rebates.
However, it doesn't hurt to do the research and find out if the car you are interested in is on the
chopping block. If coupled with a customer rebate, it can surely prove as a valuable tool for
saving yourself money.
To find out more about the different incentives and rebates currently being offered by each manufacturer,
check out these sites:
