The Four Major Incentives for Buying a New Car
Buying a new car is second only to buying a home in terms of large, important purchases in your life. Even the least expensive new car can take years to pay off; it’s a major life investment. You can take advantage of a number of different incentives, from manufacturers and dealers, to more easily afford a vehicle. Unfortunately, it’s difficult to make sense of these incentives, and equally easy to pay more than you want to when a dealer pulls the wool over your eyes. Protect yourself and get the best deal possible; learn about incentives.
Cash Rebates/Bonus Cash/Customer Cash
This incentive comes under a dozen different names, but they all refer to the same simple proposal. The manufacturer of the car will offer a cash rebate on a particular vehicle. It’s quick, it’s easy and it’s simple. When you sign to buy a car with a cash rebate, you’re given that cash rebate. You can then walk off with the cash, or you can immediately apply it towards your auto loan. What you do with the money is up to you.
The tricky part of a cash rebate is qualifications. Some manufacturers only offer rebates if you finance your car through them. Others will offer you a rebate if your vehicle trade-in is a competitor. Some will offer rebates for holidays and specific times of the year. You never know when a rebate is going to appear, and no manufacturer will retroactively apply a rebate to a car you purchased before the rebate qualification period. If you want a rebate, you need to buy while one is active.
Low APR or Low Interest Financing
This is one of the most common audio triggers for deals; it sounds good on the radio and in commercials, so it’s a frequently advertised deal. They may advertise a low APR or zero percent interest for a certain period. Depending on some external factors, a low or no interest auto loan may save you thousands of dollars over the course of your payment schedule.
As with cash rebates, qualifying for low interest is tricky. You will generally need to have excellent credit. If you don’t, you’ll likely find yourself declined for the special low-interest loan.
Low-interest car loans are also generally mutually exclusive with other incentives. If you get a low interest loan, you probably don’t qualify for a cash rebate on the same vehicle, and vice versa. You will need to choose between these incentives. In most cases, the cash rebate will be the better choice, particularly if you plan to pay off your loan quickly.
A lease is a form of paying for a new car without securing the financing to buy it outright. Dealerships often calculate lease prices so that the final price of the car is lower than a straight purchase. What makes this an uncommon option?
Leases have strings. You may be subject to strict penalties if you miss a payment on a strict payment schedule, which may add time to your lease, raise your monthly cost or lead to a break in the lease. Other leases have low monthly payments, but repayment times that can double the length of a typical loan, leading to a much higher final total.
When you consider a lease, you need to consider four factors.
- How many months does the lease last?
- How many miles can you drive in a year, if there is a limit?
- What is the monthly payment on the lease?
- What will you need as a down payment on the lease?
Each of these factors has a threshold at which point the lease becomes a bad deal.
Tax incentives are rare, and they only apply to a few specific vehicles. Generally, these are hybrids or electric vehicles. If this is the kind of vehicle you’re interested in, you should investigate the government tax incentives for purchasing one. Tax credits vary from year to year and from vehicle to vehicle, with the size of the battery as one critical factor in hybrids. You will need to do some detailed research, but you may be able to come out ahead.
The key when managing incentives for buying a new car is time. If you have the time to wait and watch, you can get an excellent deal on a new car. Pick a vehicle, watch for incentives and calculate the prices you’ll find with different kinds of deals. You may end up with a significant discount.