When it comes to the car buying process, which is better? A factory incentive, rebate or promotion? The dealers would like you to believe they all mean the same thing, but they are actually very different offers. When you’re looking for a new car, it’s important to be able to decipher the language.
A great place to start is with the true meaning of a factory incentive. These are kickbacks dealers receive for selling a specific car that may not be selling well.
Technically, they are secret agreements the factory makes with the dealer. However, they are often used as a tool to lower new car prices, thus making a certain vehicle more desirable to potential buyers. Incentives can run anywhere from $500 to $6,000, so when you buy a car, be sure to inquire as to whether the dealer is receiving a factory incentive for selling it. If one is being offered, you should be able to start the negotiations well below the invoice price.
Manufacturer’s rebates are typically used as a sales tool to get customers into the dealership, but be careful with them. Sure, it may sound great to have the list price marked down by $1,000, but sometimes rebates come with an offer of financing at a higher interest rate. How do you know which is more advantageous? Do the math. Often, the interest payouts with the rebate exceed the lower interest payouts without it.
The main difference between a rebate and factory incentive is that the latter is not typically disclosed to the buyer. Manufacturer’s rebates, meantime, are a selling point found on billboards, advertised in commercials and announced from the treetops around the dealership.
Another tool dealers use to get customers onto their lots are good-old-fashioned promotions. Sometimes these involve giving away a free luggage rack with the purchase of an SUV, or throwing in window tinting if you sign on the dotted line by Saturday at noon.
To find out more about the different incentives and rebates currently being offered by each manufacturer, visit www.CarSmart.com, www.cars.com or www.Edmunds.com. All three sites are chock-full of information.
