You see ads from two car dealers for the exact same vehicle. Both show a list price of $25,200 and an advertised sale price of $23,700, a $1,500 savings. Which is the better deal? How can you know? Find out at the end of this post.
Welcome to the world of consumer rebates and incentives, a confusing world sometimes made more confusing by dealer advertising. Let’s look in.
Manufacturers put consumer rebates/incentives on their vehicles to move them faster and respond to competition and a changing market. They could just lower the price, but that is difficult to do logistically and can’t be done as quickly. (Note: They also provide dealer incentives separately from consumer incentives–that will be the subject of another post.)
These incentives can be simple or complicated. For instance, there could be a $1,000 rebate on every Ford Mustang for every buyer. Simple. Or, the rebate could apply in only one area of the country. Or only to buyers who currently own another specific model such as a Chevrolet Camaro. Or only to first-time buyers, or people who finance the vehicle through Ford, or if you buy a particular option package, or any of a host of other restrictions.
Typically, when you receive a manufacturer’s incentive, you get cash back on your new car purchase. You technically buy the vehicle from the dealer at a higher, pre-rebate price, pay taxes on that higher price, and then get a rebate back. So the rebate is not quite as good as a price discount, since you pay taxes on the higher, pre-rebate amount.
How do you know which rebates/incentives you are entitled to? Good car dealers will know the “rebate turf” and help you make sure that you are getting all the rebates you deserve. (Did you know that veterans often get a special rebate? Recent college grads?) But even well-meaning dealers don’t always know what rebates are available. And if you don’t know, you may miss it.
Once you’ve zeroed in on a model, the first place to go is the web site of the model’s manufacturer. For instance, this Chevrolet page asks for your zip code and shows you available incentives.
But don’t stop there, and don’t accept that the manufacturer’s site is always complete and accurate. Go to car-buying sites such as TrueCar, Edmunds, Kelley Blue Book, Cars.com, and IntelliChoice. These list rebates/incentives too–but remember NOT to provide your contact info or you will have lots of pen pals you may not want.
If you have a paid subscription, go to Automotive News. Click on the Data Center in the navigation bar and choose “Consumer Incentives.” You’ll see a list of incentives for all brands, but again, there is no guarantee that it is comprehensive.
Build your list of incentives by looking at three sources and listing all of the incentives shown by any of them. Then, when you are at the dealer, make sure the dealer investigates each rebate that you have identified as possible.
Which brings us back to the dealer. Consumer rebates are for you, the car buyer, not the dealer. You deserve every penny of a consumer rebate. So make sure that when you negotiate the vehicle price with the dealer, the price you negotiate is the price before any rebate is applied. Less-than-transparent dealers will include the rebate in the negotiated price, effectively raising the price that the dealer receives by the amount of the rebate.
Only after you have agreed to a price with the dealer should you and the dealer then deduct all the rebates and incentives that you are entitled to, reducing your price by the full amount of the rebate/incentive.
Which brings us back to the two advertised prices, both offering you the vehicle for $23,700.
It turns out that there is a $1,500 rebate being offered by the manufacturer on the vehicle. One dealer is discounting the car by $1,500 to $23,700. You buy the car for that price and then get your $1,500 rebate–essentially buying the car for $22,200. However, the other dealer’s “discount” is just the rebate itself. So you are buying the car for $25,200 and then getting your rebate to reduce the price to $23,700. That vehicle costs you $1,500 more. Buyer beware.