What Are New Car Rebates?

New car rebates may help make that dream car more affordable.

New car rebates may help make that dream car more affordable.

Buying a new car can be a daunting task and it’s important to do your homework before setting foot on a dealership lot. Once you’ve budgeted for a new car payment, insurance, fuel and other related expenses, the next step is determining who has the best deal for you. Understanding what new car rebates are will help you determine how you they will affect your purchase.

The Basics

If you’ve ever bought an appliance or mobile phone with a mail-in rebate offer, then you’re already familiar with how a rebate works. It is simply a monetary refund from the manufacturer of an item, provided as an incentive to boost sales. New car rebates work in pretty much the same fashion. When a company decides to push a certain car--possibly due to excessive production, or to make room for newer models--it will offer a rebate to entice buyers.

How it Works

Unlike the mail-in product rebates you're more familiar with, new car rebates can be instantly redeemed by applying them as part of the down payment on your new car. For instance, if you go into a dealership with $5,000 to put down on a new car and the manufacturer is offering a $2,500 rebate, you now have $7,500 as a down payment on the car. Alternatively, you can save $2,500 of your money and use the other $2,500 plus the rebate to apply your intended $5,000 down payment. If you're buying the car outright or just don’t want to apply it to the down payment, you're still entitled to the rebate, which will be sent to you in the form of a check.


It's important to note that new car rebates are incentives that are offered from the manufacturer, not the dealership. This means that it shouldn’t be part of the negotiated price or used as a dealership discount. It can be included as part of your down payment, which is a factor in negotiations, but should not be confused with any other type of negotiating discount. In addition, while most manufacturer rebates are offered nationwide, some are specific to certain regions based on sales and the need to move certain models.


The most significant benefit of a new car rebate is its ability to reduce your total loan amount when applied as part of a down payment. Additional down payment funds can be the difference in getting a more expensive car than you originally thought you could afford. Remember that while the payments might be affordable thanks to the rebate, the insurance and fuel costs you have budgeted may increase as well. New car rebates can also be significant for buyers without anything to offer as a down payment. The more money you put down on a car, the lower your interest rate will likely be.

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About the Author

Based in South Florida, Leann Harms has been writing since 2008. Her design, technology, business and entertainment articles have appeared in "Design Trade" magazine and Web sites including eHow. Harms has a Bachelor of Arts in English from Florida Atlantic University.

Photo Credits

  • front of red cabriolet image by goce risteski from Fotolia.com