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How to Use New-Car Incentives and Rebates

What They Are and How They Can Save You Money

A new car's price can be a moving target for shoppers. An uninformed buyer might pay one price, while a shrewd negotiator could pay much less. What if there was a way to get a discount without having to rely on your negotiating skills? Happily for consumers, there is such a way, via incentives and rebates.

New-car incentives and rebates are discounts that an automaker offers to help steer consumers away from the competition or make sure they stay loyal to a brand. They are also used when a certain model is not selling well enough and the automaker needs a lower price to spur sales. Knowing about car incentives and rebates and how to incorporate them into the buying process can potentially save you thousands of dollars.

Recent college graduates are common targets for new-car incentives.

Recent college graduates are common targets for new-car incentives.

Incentives typically take the form of cash rebates, low APR financing and special leases. Many carmakers also provide additional incentives to college graduates, members of the military and other specific customer segments.

Incentives can help you decide among a few vehicles you're considering. For example, Car A and Car B might have the same price, but if Car A has a $1,500 cash rebate, it becomes a much better value proposition.

Manufacturers can change incentive programs at any time. The incentives and rebates listed on Edmunds reflect national and regional promotions. Make sure you enter your ZIP code to ensure that the incentives information is correct.

Know the Incentive Types

Here is a quick rundown on the incentives you'll see as you're shopping:

Customer Cash: Customer cash, also called bonus cash, is a rebate the manufacturer gives to buyers. Buyers typically apply it to the price of the vehicle, but they can sometimes opt to keep the money for themselves. Bonus cash can also be applied to the finance price of a lease.

Buyers often must meet certain requirements in order to get a rebate. To qualify for a loyalty bonus, for example, buyers need to show proof that they own a vehicle of the same make as the one they're buying. A "conquest" bonus, on the other hand, might require buyers to show that they own a competitor's vehicle. Many carmakers also require that the vehicle be financed through their "captives," meaning financing companies they control, such as Nissan Motor Acceptance Corp. or Honda Financial Services.

Low APR Financing: This incentive offers interest rates on financed vehicles ranging from zero to about 5 percent. A buyer needs excellent credit to qualify, however, so not everyone will be eligible. This is why we advocate that buyers get preapproved for a car loan before they go shopping. That way, they'll have an interest rate to compare to what the dealer offers. They'll also have something to fall back on in case they can't qualify for a dealer-offered low APR financing deal. The low interest rates are sometimes tied to the length of the loan term, so pay attention to this detail.

Low APR financing usually cannot be combined with customer cash. And in most cases, customer cash is a better deal because you are financing a smaller loan amount. But if you want to explore all your options, the Edmunds Low APR vs. Cash Back Calculator will help you spot the better value.

Special Leases: These also are known as lease specials or lease deals. Manufacturers often offer special lease programs through their captive financing companies. Most of the lease programs listed on Edmunds are of this variety and are formally known as subvented or subsidized leases. These subsidized leases are generally based on a residual value that's much higher than the actual worth of the car at the end of the lease. In other words, the carmakers and dealers tweak the residual value to bring down the monthly payment and thereby make the vehicle more appealing.

Special leases are very common and can provide a low monthly payment with little or no money down — provided you pay attention to the fine print. There's not much room for negotiation with advertised lease specials. Instead, focus on getting the dealer to match the advertised special. Some dealers might say they can offer you a "better deal" than the lease special. And while the monthly payment may seem lower, it could cost you more up front or in the long run. So shop with care.

Here are four important items to consider when you get a lease quote:
1. The length of the lease in months. Edmunds recommends 36 months.
2. The down payment. Edmunds recommends zero down.
3. The number of miles allowed per year, which is usually 12,000.
4. The monthly payment, including taxes and all fees.

See Edmunds pricing data

Has Your Car's Value Changed?

Used car values are constantly changing. Edmunds lets you track your vehicle's value over time so you can decide when to sell or trade in.

Price history graph example

How to Research Incentives and Rebates

Go to the Edmunds Incentives and Rebates page. Click on the car brand you are interested in. You'll see a summary of current incentives. This will give you a basic idea of what the automaker is offering. Click on one of the models shown to see further details. Once you know the incentives, call or email the dealer for a price quote. Most of the time the salesperson will tell you about any current incentives, but it is still a good idea to have done your own research ahead of time.

Just because you are using an incentive does not mean you have to forgo negotiating the car's price. Instead, treat the rebate as a given and continue to negotiate as you normally would. For example, if you plan on offering $500 below MSRP, make the offer and say "plus incentive."

Now that you know the basics of car incentives and rebates, make it a point to research them before making an offer. The key to being an expert shopper is successfully combining an incentive with a negotiated price.

Here's a final tip: If there aren't any incentives on the car you are interested in, consider waiting a few months. You will probably find that the selection is better and there will most likely be incentives offered on the car.