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How Auto Rebates Work

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You may watch car advertisements that scream about rebates that offer deep discounts on new cars. But once you get to the dealership, you discover that these rebates have strict requirements, and that you may not qualify for any of them.

To help you navigate how car rebates and discounts work, we break down common car-buying incentives, from who might qualify for them to what paperwork you’ll fill out and how much these incentives are typically worth.

Note that this is a general guide with common rules; the fine print for any discount will vary. It isn’t an exhaustive explanation of all the requirements you may need to meet once you’re at the dealership — for the nitty-gritty details, you’ll need to visit the manufacturer’s website or speak with a car salesman.

Click below to explore these topics:

Auto rebates vs. incentives
Cash rebates and special financing
Car rebates
Car buying incentives

Auto rebates vs. incentives

Here’s a rundown of common questions and answers about auto discounts and deals. Knowing what’s what might help you know if a salesperson is pulling your leg by telling you that you can only get that deal from them.

What is an auto rebate? In the auto world, a rebate is new car discount for customers who meet qualifications set by the car manufacturer. It’s a type of incentive, but it’s not dealership specific. You don’t have to go to a certain dealer to get the rebate because a rebate can only come from the manufacturer. So if you qualify for a rebate at one Ford dealership, you can go across town in the same day and get the same rebate on the same car at another Ford dealership.

What is an auto incentive? An auto incentive is anything any seller does to “incentivise” consumers to buy. This can include rebates, low-APR financing, free oil changes, lifetime powertrain warranties, 90 days delayed payment and more. If it’s an incentive offered by a dealership, that means you probably can’t go across town to a different dealership and get the same incentive. If you’re unsure whether something is a rebate or an incentive, check the manufacturer’s website or call another dealership of the same car brand.

Why are there rebates? Rebates are how car manufacturers can influence sales. For example, if Volkswagen’s Golf GTI sales decline and there’s a large supply, VW might increase the cash rebates on them in order to convince more people to buy. The manufacturer will often change which car you can get with what rebate based on supply and demand.

Are there rebates on used cars? There are never rebates on used cars. The manufacturers don’t own used cars. If a dealership buys a used car and tries to sell it, the dealer may discount the car’s price, but this is not counted as a rebate.

Which car brands offer auto rebates? Almost all manufacturers offer auto rebates. Mass market manufacturers, such as Ford, Chevy and Nissan, tend to offer many types, and you may be able to hit the jackpot if you do your research and planning. Higher-end manufacturers such as Land Rover may not offer rebates.

 

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Cash rebates and special financing

Cash rebates are the manufacturer’s way of offering a sale. Unlike most rebates, you don’t have to be in a certain profession, such as the military or education system, to qualify.

Cash rebates go by many names: “purchase allowance,” “lease cash,” “bonus cash,” “customer credit” and “holiday cash,” to name a few. Unlike most retail sales, they’re usually announced as a dollar amount instead of a percentage off the car’s price. A $500 rebate sounds impressive, but on a $30,000 car, that’s only 0.02% off.

Cash rebates can range from $500 to $5,000, depending on the car and the time of year. They can change as often as every 15 days, too, making them the most fickle type of rebate. Depending on the market, they might stay the same, decrease, disappear or even increase on a particular vehicle after the current rebate expiration date.

Nothing is guaranteed with cash rebates. The dealership doesn’t know what’s coming up, either, as the manufacturer makes changes based on high-level supply and demand. So pay attention to the expiration date if you’re undecided on a vehicle.

Can you combine a cash rebate with other offers? This depends on the manufacturer’s rules for that specific cash rebate. For some cash rebates, you’ll be able to use them in conjunction with other offers. For others, you won’t be able to combine. Don’t be afraid to ask a dealer about combining offers.

Special financing incentives

These are offers from the manufacturer that provide a discounted APR on your loan when you finance with the manufacturer’s lending company (think: Toyota Financial Services for Toyota). To qualify for this kind of incentive, you usually must be in a high credit tier. The exact credit requirements to be in a high credit tier differ per manufacturer.

In rare cases, you may be able to combine a cash rebate and a special financing incentive. Most of the time, however, if you do qualify for low or 0% APR financing, you may be offered a choice: this or a cash rebate.

Why would you have to choose between a rebate and low APR? If you are offered this choice, it’s because both options are usually worth the same amount of money.

If you choose a rebate, that money is applied to the sales price of the car.

If you go with the low APR, that money is applied to “buy down” the APR, which may be a little harder to understand. In a nutshell, that money pays the lender upfront the income it would have made off you paying the regular, full interest rate.

Which is better: a rebate or a low APR? It’s almost always better to take the rebate because you get the money upfront. Buying down the APR means you’ll have to keep the car for the full loan term in order to capture all the value.

Car rebates

Besides the cash rebate, here are the most common auto rebates you may see advertised. Remember: These are not dealership-specific; they are manufacturer-specific. So if you qualify for a military rebate on a specific car at GMC, you can go to any GMC dealership on the same day and get the same rebate on the same car.

But just because you qualify at GMC for that rebate, doesn’t mean you’ll qualify at Ford for the same type of rebate — each manufacturer has their own rules.

This is not an exhaustive list, either. Check the manufacturer website or a dealership for more details.

Military rebates
Grad and student rebates
Educator rebates
Conquest and loyalty rebates

Military rebates

Who may qualify. If you, your spouse or a member of your household serve or have served as a member of the U.S. military, you may qualify for a military rebate. Most original equipment manufacturers (OEMs) require that the service member either be active duty or to have separated from the military within 24 months.

However, some manufacturers have various exceptions. GMC specifies service members who separated within 36 months and disabled veterans — no matter their separation date — can qualify. Kia includes all service members who were honorably discharged, no matter their length of service or date of separation.

What to bring. The best document to bring is either your Leave and Earnings Statement (LES) if you are a current member of a military branch or your DD-214 if you are retired or separated from the military.

Some businesses also accept a bank statement that shows current military pension or disability earnings, or an official letter that shows future pension eligibility. Military ID badges, however, are not accepted as proof of identity because making a photocopy of them is illegal.

For military spouses and household members. If you haven’t served but your spouse or household member did, you can qualify for this rebate. You’ll need to have the person who served come with you to the dealership with the documentation to prove they served (the LES or DD-214), plus proof of your qualifying relationship with them.

If you are married, you’ll need to bring your marriage license. If you live at the same address, you’ll need to prove that by either showing identification with the same address (such as a driver’s license) or other proof of residence (such as a bill with the address and your names on it).

How much is it worth? It’s usually $500, although it may be worth more or less depending on whether the manufacturer has any special events going on. You may be able to combine it with different offers, such as a low-APR program and other rebates.

When to get it. Military rebates last year-round, but you may find special deals around holidays, such as Memorial Day. During the holidays, these rebates may apply to more cars or manufacturers may relax restrictions, allowing more veterans to qualify.

Grad and student rebates

Who may qualify. Graduate and student rebate qualifications are pretty standard across different car brands. Current students who are within six months of graduation or graduated within the last 24 months might qualify. The school needs to be an accredited trade, vocational, technical or junior college, a two- or four-year college, a university, graduate school or a registered nursing degree program.

What to bring. If you are a current student, you may need to show your current student ID or bring your current transcript showing enrollment and graduation date. If you already graduated, bring your diploma or transcript. Some student discount programs also require that if you don’t already have a job, you do have a job offer with a start date that is within 90 days from the day you officially buy the vehicle.

How much is it worth? These rebates are usually worth $500 and may be part of a student or first-time buyer program with special APRs and 90-day deferred first payments for those who qualify. You may be able to use it in conjunction with one of these programs or others, such as a separate low-APR program, and other rebates.

However, there may be limits on what you could combine these rebates with. For example, Acura doesn’t allow customers to combine a student rebate and its Zero Due at Signing Lease Program.

When to get it. As long as you fall within the timeframe for the qualifications, student rebates are available year-long. You may be able to combine it with more rebates during the summer though.

Educator rebates

Who may qualify. If you teach at a public or private school (elementary grades through graduate level), you may qualify for educator rebates.

For the GM educator rebate (which covers the GM brands Chevy, Buick and GMC but not Cadillac), you may be able to sponsor your spouse and dependent children or stepchildren, as long as the children are under 21 or full-time students under 25. The caveat is that public school educators — as employees of the state or municipal government — might not be able to receive this rebate if it breaks any ethics or gift-acceptance policy.

The other limiting factor is that not many manufacturers offer an educator rebate. Some dealerships, however, do feature educator discounts — and you may be able to get a discount through the school or university you work for if it is in a partner or affiliate program with a manufacturer, such as Ford.

What to bring. Bring your valid school ID, a pay stub that’s dated within 30 days and shows your name and the school’s name, and your driver’s license. If you’re interested in a GM brand car and want to do some paperwork ahead of time, you can register on the GM website — that way, you’ll only have to bring an ID number.

How much is it worth? The amount may range from a flat amount such as $400 to 0.6% off the invoice (which is less than MSRP).

When to get it. This type of rebate is good throughout the year, but pay attention to what vehicles it applies to as it can change monthly. If you do register on the GM website, your ID number is good for 90 days, after which you’ll need to do the application again to prove you still qualify.

Conquest and loyalty rebates

Who may qualify. A loyalty rebate is a reward for customers choosing to buy from the same car brand again. A conquest rebate is an enticement for customers to switch car brands. To qualify, you or someone in your household should currently own either the same brand or a competitive brand of vehicle that is usually 10-model-years old or younger.

But not all manufacturers offer this type of rebate, and some might specify that you have to own not just a competing brand, but a competing vehicle model — for example, a Chevy Silverado or a Nissan Titan if you’re looking at a Ford F-150.

What to bring. Bring the car registration for the qualifying vehicle. If the car is registered to a household member, you may have to prove that you live at the same address. As for proof of address, the easiest thing might be to show your driver’s license or an utility bill.

How much are they worth? Both rebates are usually worth $500 and act as a discount on the vehicle’s price. You generally cannot use both a loyalty and a conquest rebate to buy the same vehicle, but you can usually combine either a loyalty or a conquest rebate with other offers.

When to get it. Car brands are most competitive during the busiest months for auto sales, in the summer. June and July is when you’re most likely to find the best deals for the conquest and loyalty rebates.

Car buying incentives

Besides rebates, there are other deals that could lower the price of the car or decrease what you pay overall. The two are different because they don’t usually have a set value, don’t always come from the manufacturer and you may be able to use some of these for things other than the car itself. Even if they are offered by the manufacturer, a dealership may or may not choose to participate in these programs.

First-time buyer program
First responder discount
Mobility programs
Dealer contribution
Business programs
Diplomat discounts

First-time buyer program

Who may qualify. To be considered a first-time buyer, you must not have financed a vehicle before, and cannot have a current or previous auto loan or lease on your credit report. However, if someone got a car for you or you bought a vehicle with cash, you could still qualify. Some programs will also require proof of full-time employment and income.

What to bring. You won’t have to bring a copy of your credit report — the dealership will only accept a credit report it gets directly from a credit agency — but it may be a good idea to bring three months’ worth of paystubs to prove employment and income.

How much is it worth? The value of this is hard to nail down. For example, a first-time buyer with little to no credit history may not be able to finance a vehicle at all unless they’re in this program — or, without this program, they may be approved for an extremely high APR.

When to get it. As long as you meet the requirements, this program can be found year-long.

First responder discount

Who may qualify. This is available to paid and volunteer firefighters, EMT/paramedics, 911 dispatchers and police, including police officers, sheriffs, deputies, correctional officers, state troopers, and federal law enforcement officers.

What to bring. Some manufacturers require you to register online to prove you qualify, in which case you only have to bring the number the site gives you. Others may ask for a pay stub that’s dated within 30 days showing your name and your employer. If you are a volunteer, you may be asked to show other paperwork or provide a phone number for verification.

How much is it worth? Because this is not a rebate, it’s not set at a certain amount. It can vary based on the car and the current market, but it may be worth as much as $1,600.

When to get it. It’s available at all times of the year, but which vehicles have the discount and for how much varies depending on location, timing and supply.

Credit cards

Who may qualify. Some manufacturers, including Mini and GM (for its Chevy, Buick, GMC and Cadillac brands), offer credit cards that allow customers to apply credit card points to qualifying dealership purchases, such as oil changes, parts, accessories and a vehicle purchase. Approval is based on credit.

How much is it worth? For this, you’ll have to read the fine print. Point accumulation based on what you buy, and how many points a service or product is worth may vary. And if you’re looking to use points toward a vehicle purchase, you may not be able to combine the points with certain other sales programs.

When to get it. To save up points toward a purchase, you’ll want to get it well before you make the purchase. The larger the purchase, the earlier you should get the card so you can save up more points.

Mobility programs

Who may qualify. People with permanent disabilities and their caretakers may qualify to get a reimbursement for any equipment designed to help disabled motorists or passengers. Some mobility programs cover the equipment and installation costs, but may be particular about which equipment qualifies and require the equipment to be installed by a licensed person. Make sure you read the fine print or talk with a dealer.

What to bring. In this case, you don’t have to take anything with you to the dealership, but be sure to mail the reimbursement paperwork after the purchase. Check with the dealer or manufacturer for the right forms to fill out, receipt requirements and address.

How much is it worth? These programs can offer up to $1,000. Because it’s not a rebate on the vehicle, but rather a reimbursement for vehicle equipment, you can combine it with any other incentives you may qualify for.

When to get it. There is no seasonality for this incentive.; manufacturers that offer it make it available all year. However, special offers within this program, such as deals with OnStar, may only last a few months, and you must file for the reimbursement within a set window of time after you purchase the vehicle (usually within six months).

Dealer contribution

What it is and who may qualify. This is similar to a cash rebate — it’s a discount to the sales price of the vehicle, only the money comes from the dealership, not the manufacturer. You don’t have to have a particular profession in order to qualify for this and you don’t have to bring anything with you, but you may have to be in a top credit tier.

How much is it worth? It can go up to $950, depending on the vehicle, the dealership and the time of year. Unless you’re specifically looking for this, you probably won’t notice it. This type of discount may be included in the total “discount off MSRP” price advertisements, which can also include all other applicable rebates.

When to get it. Look for a good sale at dealerships.

Business programs

What it is and who may qualify. Business programs include discounts offered by the manufacturer to businesses either for the business itself as fleet vehicles or to the business’ employees as a perk. It may take at least five vehicles for a business to be counted as having a fleet and at least twenty employees with the option to buy through your company for a discount to be offered to them through the business.

What to bring. You’ll probably have to provide the EIN (employer identification number), which functions as a company’s Social Security number. And if you’re an employee getting a discount as a perk, you may have to prove your employment status with a W-2 or recent paystubs. Some manufacturers may require that you request and receive a PIN to prove your employment status, in which case you should only need to bring that PIN.

How much is it worth? You may find that the more vehicles you buy, the greater the discounts could be. Many manufacturers have a special sales division specializing in fleet sales — so if you’re looking to buy five or more vehicles, it’s worth calling them up.

When to get it. If you have a PIN, be aware of its expiration date. Volvo’s PINs, for example, are only good for 72 hours. And while you can request a new one if it runs out, you are only allowed four requests per year. So only request a PIN when you’re sure you’ll buy within the expiration date.

Diplomat discounts

Who may qualify. If you work for an embassy or international organization, such as NATO, the World Bank, UNESCO or any European Union agency, commission or institution, you may be eligible for a price discount and international shipping.

What to bring. A copy of your diplomatic or service passport and a signed order form.

How much is it worth? Because this kind of deal is available in multiple countries, it depends on the country, but can be up to 15% below the local price. Be aware that you may be required to put 10% as a down payment to be in the program and get the discount.

When to get it. The timing of this may be more dependent on when and where (as in which country) you need the car.

 

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