Car Buying Incentives Can Reduce Sticker Shock

Buying a car is rarely easy, but factory-to-dealer incentives can take some of the sting out of the process — and put some cash back in your wallet.

Car manufacturers offer buyers two types of special incentives to help dealerships boost sales on certain car models:

1. Rebates: A fixed amount of money for purchasing a particular vehicle.
2. Low-interest financing: Auto loans with a low annual percentage rate, or APR.

» MORE: How to find car leasing specials

Where to find them

Be sure to research purchase incentives before car shopping, as they’re not always clearly advertised at the dealership.

These offers can make a big difference in what car you look for. For instance, if you’re choosing between two closely priced cars, finding out one has a $2,000 rebate could make your decision a lot easier.

To view incentives, go directly to the manufacturer’s website. Look for tabs with terms such as “current deals and offers” or “current offers and leases” to see a summary of offers on different models.

You’ll also need to input your ZIP code, since different regions of the U.S. have different offers. So if you live in the Southwest, a deal available in New England won’t apply to you.

Let’s take a closer look at each incentive to see what deals you are likely to find:

Rebates

After you’ve purchased your new car, you can get a lump sum of cash from the manufacturer in the form of a rebate. Rebates are offered by auto manufacturers to spur sales of certain cars, or sometimes to make room at dealerships for newer models.

Most car owners choose to immediately apply this money to the down payment of the car. Sometimes it’s enough to cover the entire amount, or at least take a big chunk out of it.

Alternatively, you can have the dealer send you a check and use the money as you wish.

What to know

Rebates may come with conditions: Some require you to be a recent college graduate, or be a member of the military. There are even “conquest” incentives, for those switching car brands, and “loyalty” incentives, for those getting a new car within the same brand. Make sure you qualify before you’re at the dealership.

You can still negotiate: You don’t need to buy the car at the dealership’s advertised sticker price to get the rebate. Take the rebate as a given, and continue to negotiate down the car’s price.

Low-interest financing

A good credit score could get you lower interest rates on your monthly payments if you purchase a car with a low-APR financing incentive. People with top-tier credit could receive rates as low as 0%. Good credit scores will typically qualify you for 1% or 1.5% APR.

Paying 0% to 1.5% is far below the national average interest rate, which is about 3.2%.

Say you buy a Camry with a $23,000 retail price tag, and get a 72-month loan without a low-interest incentive. With the average 3.5% rate, you’ll pay about $2,533 in interest over the life of the loan. With a 1% APR rate, you would pay only $706 in interest, a savings of $1,827.

What to know

Credit score matters: Not everyone will be eligible for this incentive, since it’s based on credit score. But there are auto loans for people with lower credit scores.

It’s always a good idea to get preapproved for a car loan before heading to the dealership, so you can easily compare other interest rates to the dealership’s and choose your best option.

Additional tips

Incentives are usually offered monthly. If you have your heart set on a new car with no current offers, considering waiting a few months to see if any deals pop up. While new deals arrive fast, the downside is that they also expire quickly.

Manufacturer incentives should be available at any regional dealership. These deals aren’t exclusive to any one dealership, as long as it’s in the participating region, so be sure to shop around. But dealerships sometimes have offers specific to their location, so ask the dealer if it’s offering any site-specific rebates on top of the national ones.

Reject dealers pushing extra purchases to “qualify” you for incentives. One example would be insisting the rebate doesn’t come without a warranty purchase. If you’re in the participating area and qualify under the national terms, you don’t need to buy anything extra. If a salesperson is relentlessly pushing extra purchases on you to get these incentives, walk away.

Nicole Arata is a staff writer at NerdWallet, a personal finance website. Email: narata@nerdwallet.com.