Yahoo Autos What is a new car incentive or rebate?
This is part of our Car Buyer's Glossary series breaking down all the terms you need to know if you're buying a new or used car from a dealership.
Car dealers aren't in the business of giving money away. They're in the game to make a buck – and can you blame them? So is everyone else selling a consumer good. So when you hear about an incentive (that is, a rebate, low interest rate, or cash back offer), you should know what's going on before you assume you're getting a free lunch.
There are a few main types of incentive:
A cash-back or rebate offer
A low- or zero-percent interest offer
A factory-to-dealer incentive
On a very basic level, an incentive does one of two things for a car dealer: it gets people into the dealership, and it helps move out inventory. Let's look at these both a little more closely.
The first part is basically the psychology of marketing. If you tell someone they can get $1,000 back on a new car deal, it might get them excited about (and invested in) the process. You might be a little less concerned about negotiating the price down since you're getting money back. And the dealer has other avenues to make up that $1,000 – padding the interest rate a tiny bit or selling you some high-profit extra services, like an extended warranty. It's a bit of a shell game – you're focused on one thing, but the dealer has several ways to make a buck. The idea is you'll be a bit distracted and or think you're getting a better deal than you really are, and they can make some profit in other places. And that's totally their prerogative.
