What is a rebate on a car?

Car sellers know that buyers love a good deal, and they use a variety of offers to help incentivize sales. If you’ve ever shopped for a car, there’s a good chance you may have come across a rebate offer at some point. So, what is a rebate on a car, and how could it help you? Let’s find out.

How a rebate on a car works

Car rebates are essentially a “money back” offer that effectively lowers the purchase price of the vehicle. Rebates are usually listed as a dollar amount, as opposed to discounts that are expressed as a percentage off. Rebates can apply to a purchase in a couple of ways:

• Toward lowering the purchase price
  
• Toward the down payment

Rebates are offered at the manufacturer level and typically apply to new car purchases at franchised dealerships. If you're intending to lease instead of buy, don't worry — you can also find rebate offers on leased cars.

Bear in mind that rebates sometimes come with special requirements to qualify. Some of these requirements may include being above a specific credit score or financing through a specific lender. Rebates are often tied to certain models and may not apply to the car you want. There may also be regional variations in the offers available and offers tend to be updated quite frequently.

Other kinds of car rebates

While cash rebates tend to be the most common, there are several other types of rebates prospective car buyers may be able to take advantage of. It may be helpful to inquire with your car dealer to see if any of the following rebates potentially apply to you:

Loyalty rebates

Loyalty rebates are sometimes offered to customers purchasing the same car brand again as a way for manufacturers to reward their loyalty.

Competitor rebates

On the other hand, switching loyalty may come with its own perks. Some brands occasionally offer rebates to customers who switch over from one of their competitors. Car manufacturers are willing to compete for your business, which can certainly help you as a buyer!

Demographic rebates

Sometimes rebates are offered to specific demographics. Prominent examples include rebates for members of the military and their families, recent college graduates, educators and more. 

Car rebates vs. financing incentives

All rebates are incentives, but not all incentives are rebates. An incentive can be any kind of offer provided by the manufacturer or dealership to make the deal more attractive. The world of incentives is therefore wide and varied. Commonly offered incentives include (but aren’t limited to):

• Special financing deals like lowered interest rates or a zero annual percentage rate (APR) for a certain window of time
  
• Delayed loan payments for the first few months
• Additional accessories and upgrades bundled in
• Maintenance perks and discounts like complimentary oil changes or service warranties

Most dealers will ask you to choose between financing incentives or rebates (though it may not hurt to ask if they can be combined). A cash rebate may be helpful for your immediate financial situation, while financing incentives may offer similar value, just spread out over time. If you crunch the numbers on your own, it might help you determine what provides you with the best benefit.

In summary

So, what is a rebate on a car? A car rebate is a cash discount offered by the manufacturer on select vehicles and is not dealer specific. A rebate is one of many possible incentives that may be offered to help sweeten the deal for you and hopefully help save you some money in the process.