Incentives & Rebates
Manufacturer to Customer Programs | Manufacturer to Dealer Programs | Today's Incentives & Rebates | Glossary
Incentives and Rebates are programs offered by the manufacturers to stimulate sales. The three most common programs are provided directly to consumers in the forms of Cash Rebates, Low Interest Financing and Special Leases. Some manufacturers also provide first-time buyer, military, and other programs to target specific customer segments.
Manufacturers also provide Marketing Support directly to dealers, which may or may not be passed on to consumers. These marketing support programs take many forms, but the most common type of program is a Dealer Cash Incentive. Incentive programs are subject to change at any time by the manufacturer.
| Manufacturer to Customer Programs |
Manufacturers provide Cash Rebates directly to the customer at the point of sale to reduce the net price of the vehicle. Consumers normally elect to credit a cash rebate as a down payment against the new vehicle's purchase price.
However, there are many instances in which customers are allowed to choose either a Cash Rebate or a Low Interest Financing offer. In these cases, you may find it useful to utilize the Low APR-vs-Cash Back Calculator to help you make this decision based on your individual circumstances. In still other cases, customers may benefit from both the Cash Rebate and the Low Interest Financing offers in combination. This varies by manufacturer. It is important to note that the advertised Annual Percentage Rate (APR) quoted in the offer is normally based on the top customer credit tier and not all consumers will be eligible for this best rate.
Manufacturers often offer Special Lease programs through their captive financing companies. Most of the lease programs listed on Edmunds.com are of this variety and are known as a subvened (subsidized) leases. Subsidized leases such as these are generally based on a Residual Value much higher than the actual worth of the car at the end of the lease and/or an interest rate, expressed as a Money Factor that is subsidized to result in below market rates. Each Special Lease program specifies the monthly payment, the Term, any Down Payment requirement, the Security Deposit, and the annual Mileage Allowance. The estimated monthly payment is based on a typical amount financed and typical Down Payment. The sales price of the vehicle, as well as the Residual Value, Lease Term, Security Deposit, Acquisition Fee and down payment may be negotiated, but they will in turn affect the monthly payment amount. In other words, you might be able to negotiate to a $0 down payment, but your monthly payment would increase commensurately to compensate.
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| Manufacturer to Dealer Programs |
While Cash Rebates, Low Interest Financing, and Special Leases are made available directly to the buyer, manufacturer to dealer Marketing Support is made available exclusively to the franchised dealer for use in marketing their vehicles. Most commonly represented as a Dealer Cash Incentive from the manufacturer, dealers may or may not choose to pass some part of this Marketing Support money on to their customers. Frequently, the salesperson will not even be aware of dealer marketing support programs, but, not to worry — our Edmunds.com True Market Value price has already taken these programs into account.
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Acquisition Fee
For a vehicle lease, a fee charged by the leasing company that covers a variety of administrative costs, such as the costs of obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease in their data processing and accounting systems. This charge may also be called a bank fee, an administrative fee or an assignment fee.
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Cash Rebates are provided by the manufacturer directly to the customer at the point of sale to adjust downward the net price of the vehicle. Consumers usually elect to credit the cash rebates as a down payment against the new vehicle's purchase price.
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Dealer Cash Incentives are typically paid to the dealers by the manufacturers to stimulate sales momentum or reduce inventory pressure for certain vehicles. There are many variations, but the most common dealer cash incentive structure provides a cash credit to the dealer upon the sale of a vehicle in the program. In other cases, dealers earn cash bonuses when they achieve sales volume targets. However, there are also programs where dealers earn the incentive upon purchasing the vehicle from the manufacturer. These programs vary widely, but in all cases the Edmunds.com True Market Value Prices have taken these cash incentives into account.
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Disposition Fee
An amount charged by the leasing institution at the end of a lease to cover the cost of retrieving and selling your vehicle if you choose not to buy it. The amount, which varies by leasing institution, is fully disclosed in the lease contract. You will be billed for this charge after you turn in your vehicle.
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Down Payment
For a vehicle purchase, the initial payment that reduces the amount financed. For a vehicle lease, an initial payment that reduces the capitalized cost (i.e., the amount financed) or that is applied to other amounts payable at lease signing.
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Finance Rate (APR)
For a vehicle purchase, the annualized cost of credit, expressed as a percentage.
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Incentives and Rebates is an auto industry term that describes the programs that manufacturers and dealers provide to stimulate sales. They take many forms, but they all lower your car-buying costs.
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Lease Term (months)
For a vehicle lease, the number of months of the term of your lease.
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Special Leases are offered by the manufacturer to stimulate sales by lowering the customer's monthly payment through subsidizing the vehicle's Residual Value or Money Factor.
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Low-Interest Financing is a loan, offered by the manufacturer's captive finance company, at a below-market interest rate. Normally eligibility is limited based on the customer's credit worthiness. Use the FREE Edmunds' Personal Credit Analyzer to find out how your personal credit stacks up.
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Marketing Support is a global term that describes manufacturer to dealer programs specifically designed to assist dealers in marketing their vehicles. The most common program is in the form of cash credit to the dealers, who may or may not choose to pass some part of this money on to their customers.
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Mileage Allowance is the number of miles that a lease payment quote is based on. (The primary factor influencing a lease payment is the expected Residual Value at the end of the term.) If the customer expects to drive more average annual miles than the standard lease allows, it may be beneficial to buy the additional miles up front (which in effect adjusts the residual value downward and in turn raises the monthly payment) as opposed to paying the mileage penalties at the end of the lease. Generally the leasing company will require customers to pay a per mile penalty at the end of the lease term if the customer's actual driven miles exceeds this mileage allowance.
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Money Factor is a reflection of the interest rate used in lease payment calculations (also called the "lease factor.") Money Factor is a method of expressing an interest rate that is more suited to computing your monthly payments. It is calculated by dividing the percentage interest rate by 2400 (regardless of the length of the loan). For example, 7.2% interest expressed as a money factor is 0.003.
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Residual Value, also known as the Guaranteed Future Value, is the leasing company's estimate of what the vehicle will be worth at the end of the lease term. The higher the residual that is used, the lower your monthly payments will be.
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Security Deposit
For a vehicle lease, the amount you may be required to pay (usually at the commencement of the lease) that may be used by the leasing company in the event of a default. Any unused amount will be refunded to you at the end of the lease term.
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Special Leases are offered by the manufacturer to stimulate sales by lowering the customer's monthly payment. The manufacturer, through its captive finance company, will often subsidize both the vehicle's Residual Value and the finance Money Factor when structuring the lease, all geared toward lowering the customer's monthly payment.
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