What Is a Cash Allowance When Buying a New Car?

It's no secret that it takes a lot of money, a solid income and good credit to buy a new car. A cash allowance, which is also known as a rebate, reduces the car's final price. A car dealer, a manufacturer or even the government might offer a cash allowance to toward the purchase of a new car. Cash allowances might be tied to your military or student status or to the make or model of automobile you choose.

Cash allowances reduce your overall cost of buying a new vehicle. They usually come with a restriction, such as the requirement that you purchase or lease a new vehicle during a certain time frame. Some cash allowances are available only if you obtain your own financing, while others might be combined with a special interest rate.

The dealer will apply the cash allowance toward the car you select. It is similar to the way a dealer would apply a trade-in or down-payment. Current allowances – called "consumer cash" – has been skyrocketing lately. In fact, the average incentive is $3,736 per vehicle, but some offer up to $6,000.

Car manufacturers sometimes offer college graduates cash allowances on new cars. Ford offers a $500 incentive to recent college graduates. If you want to take advantage of a student offer, you'll need to provide some kind of proof that you are either a recent graduate or a current student, depending on the particular offer. You might also need to contact the manufacturer for an authorization number to give to the local dealership.

If you're an active member of the U.S. armed services or have been honorably discharged, you may be eligible for additional cash allowances and discounts. For example, as of February 2019, Jeep offers a $500 cash allowance for current military and veterans. Acura offers $750, Ford varies their military offers, and Nissan has a $1,000 cash incentive.

In fact, it's hard to find a brand that doesn't offer military families some kind of cash allowance. Some car manufacturers offer allowances toward a few models during specific times of the year. The amount of the military cash allowance or discount will vary by manufacturer and model.

Some dealers will ask that you bring your military I.D., discharge papers, or some type of official document that proves your status. You may wish to call the dealer ahead of time to see what they require.

In the past, the federal government has given cash allowances toward new cars. Its 2009 "Cash for Clunkers" program was put in place to help increase new sales and remove gas-guzzling cars from the road. The allowance knocked off anywhere from $3,500 to $4,500 from the price of a new car, as long as an old car with poor gas mileage was traded in. Dealers that choose to participate in these types of programs give you the discount when you make the purchase, and the government then reimburses the dealer for the expense.

In addition to cash incentives like Cash for Clunkers, the government also offers tax incentives for hybrid and electric vehicles. While you won't get the cash straight from the dealer, you will see the impact on your tax bill. Currently, the incentive can be worth $7,500. Best of all, you can combine it with other cash incentives.