Understanding Rebates

One important part of shopping for a new car and getting the best deal you can is taking advantage of the various rebates and incentives offered by both the factory and the dealership. Since rebates and incentives are often a time-sensitive issue, here today and gone tomorrow, you may need to do some research and plan your car buying carefully in order to get the most out of the rebates available in your area.

What are Rebates?

Rebates are incentives offered by both dealers and/or car manufacturers in order to help incentivize the purchase of specific cars that they want moved for a variety of reasons. Often manufacturers will offer rebates on new model vehicles in order to get consumers to be the "first" to try them and start recommending them to friends. Dealers will usually offer rebates on those new cars which have been sitting on their lot for a long time and they are unable to sell that particular model for whatever reason, so they will incentivize its purchase with a rebate, (dealers actually begin to lose money from the moment a car arrives on their lot until it is sold).

What Types of Rebates are There?

Among the manufacturer rebates, there are loyalty rebates, which you can get if you can prove (either by trading in, or by visiting the same dealer where you bought your current car), that you are an owner of an earlier model that you wish to replace. For example, if you bought a Hyundai Accent in 2004 and are returning to buy a new one in 2009, you will probably be eligible for a loyalty rebate from the manufacturer. Incentives to clear their warehouses and move a specific model are also manufacturer's rebates. In addition to cash rebates, manufacturers will often offer financing deals in conjunction with or instead of rebates if you prefer. These financing deals may lower the percentage you pay in APR, or give you money back toward your down payment (so that $5,000 you brought in actually counts as $7,500 perhaps). Sometimes manufacturers will offer rebates to dealers in order to incentivize them to move specific cars that they want to see sold for various reasons. Dealers may or may not opt to pass on these rebates to the consumer.

Dealer rebates are more commonly available, but surprisingly used less by new car buyers because many of them don't know to ask for them. As mentioned earlier, dealers begin to lose money on vehicles once they arrive on the lot so it is in their best interest to sell them fast. Cars that don't move, perhaps because they lack a certain feature (like air conditioning in Arizona), will have incentives slapped on it, usually by first lowering the price, then possibly by offering other incentives or rebates on top of it (free car washes for a year). Dealers are also moved to offer rebates and incentives in order to make room for the new model vehicles coming in toward the end of the year. These "Model Year-End Clearance Sales" are advertised like crazy on the radio usually beginning in October.

So How Do You Get Your Rebates?

Every new car purchase should begin with a good amount of research on your part to make sure you aren't taken advantage of at the dealership. This research should include looking at the car manufacturer's website for the current rebates available. Most manufacturers will list both the consumer rebates being offered on a car and the dealer rebates being offered as well. When you go into the dealership, you should ask for both. If they seem reluctant to part with the dealer rebates, you should suddenly develop a case of wander lust, thinking perhaps of checking out another dealer for a better bargain for your new vehicle. If you plant your feet firmly enough, you may find that dealers quickly become more willing to part with the rebates and incentives that manufacturers have offered to them.

While most rebates can be handled right there at the dealership when you are buying your new car and applied for you, sometimes they may require a little work on your own, such as sending in documentation to the manufacturer and expecting a check in return over time. Rebates that require your own work are becoming much more rare, however.