Negotiate the best incentives for your next car purchase
Paying attention to automotive incentives can save you money on your next car purchase but having to decide between discounts can be difficult. Having a calculator can help you estimate your savings easily and remove any guesswork that could be involved. By adding some details about the manufacturer rebate and the special financing available you can compare your options to decide which promotion will provide the best financial benefit.
What are buyer incentives?
When an automotive manufacturer wants to increase their sales, they can offer a number of buyer incentives. They will sometimes offer rebates, bonus cash back, or a special APR. By choosing one of the discounts the buyer gets what they want at a reduced price and the salesperson closes a deal too, so everyone wins.
By understanding the difference between the types of rebates, how they are calculated, and how they may benefit you, you can easily assess the cost of either acquisition and use that information to negotiate the best deal on your next car purchase. Lets begin by reviewing different automotive buyer incentives, and continue on to how you may use the auto rebate vs low interest financing calculator.
How does cash back work?
A vehicle manufacturer may offer a customer rebate or cash back as a special incentive to purchase a certain new make or model car. Essentially, it is a type of discount that can be used to reduce the total purchase price. The rebates can range from a couple hundred to a few thousand dollars and the manufacturer will decide which models the rebate may apply to. Though a rebate may be advertised as cash back on your car purchase, it is often only applicable if it is assigned to your down payment and is used to reduce the total loan amount needed.
An important consideration when it comes to rebates or bonus cash is to negotiate the price you are willing to pay for the car first. Sales associates will immediately let you know about the rebate and even offer it as a special or local discount, when the rebate actually has no relation to dealership or the final selling price. It is best to thank the associate for the information, but insist on agreeing on a price for the car first. With a combination of good negotiation skills and cash rebates you can create even more savings.
A cash rebate will be most beneficial for buyers that may not have as much of a down payment saved up for their car purchase, have low trade-in value on their current vehicle, or live in states where the rebate is applied before the sales tax.
States that don’t tax rebates
Most states view the cash rebates as a payment on the total price of the car and therefore apply the discount after the sales tax has been calculated. It can be disappointing to the buyer, but this is how the law dictates the sale to be made.
If you have enough money for a down payment, or if your trade-in has good value, it is a good idea to consider other buyer incentives being offered by the manufacturer. An alternative discount to a cash rebate is low interest financing and the manufacturer will give you a choice between the two.
With low interest financing you can save money on the interest rate being charged on your loan, as some low interest financing rates can be as low as zero percent. However, eligibility is determined by credit score, which may prevent some consumers from pursuing this option.
It is important to verify what length of time the low interest will be offered and if there will be any adjustments to the interest rate through the term of the loan. Sometimes these low interest offers are only teaser rates offered for a limited amount of time only.
Therefore when deciding between buyer incentives it is important to figure out if it is best for you to receive a discount upfront, or save money monthly with a reduced interest rate. Using this calculator you may easily assess the benefits from both types of buyer incentives.
How to use the calculator
The auto rebate vs low interest financing calculator is very easy to use and is only comprised of two parts: an information intake and integrated results. It requires some basic figures pertaining to your potential vehicle purchase in order to provide accurate results. Let’s review this information together, beginning with your auto financing information.
Step 1: On the first line of the calculator please document the total pre-tax sale price of the car, as taxes will be calculated later on.
Step 2: On the next line of the calculator you should identify over how many months you would like to finance the vehicle purchase. Common terms include 48, 60, and 72 months.
Step 3: Next you may add your state sales tax percentage to the third line of the calculator. Remember that taxes vary by state.
Step 4:On the following three lines of the calculator you can add the details pertaining to the incentives you were offered. Identify the low interest-financing rate APR, followed by the manufacturer rebate with traditional financing.
Step 5: If you are providing cash down payment or a vehicle for trade in, add the values of each to the next two lines of the calculator. If there is any outstanding loan balance on the trade in vehicle you should state that amount on the last line of the calculator as well.
Step 6: Only some states allow a reduction in the sale price from a vehicle trade in, therefore only check the box only if your state calculates the sales tax prior to applying a trade-in deduction.
Step 7: Finally, most states apply the manufacturer rebate after the sales tax is calculated; if this applies in your state please check off the second box selection. You should only leave the box selection blank if your state was listed above and allows the rebate to be applied to the pre-tax price of the car.
Step 8: Proceed to view your auto rebate vs low interest financing results.
Once you have added these simple details to the auto rebate vs low interest financing calculator you will receive various prompts, graphs, and tables detailing your potential savings.
Immediately to the right of the calculator inputs you may see your monthly obligation after applying each incentive so that you may clearly see which incentive will cost you more money per month.
Then, below the inputs you may see a prompt of exactly how much you will save by choosing the incentive with the better discount. This figure sums up the savings over the total repayment of the auto loan while a more detailed comparison may be found in the integrated reports.
The first tab is a bar graph contrasting your auto rebate and low interest financing offers. Here you may see a comparison of the loan requirement and total payments after applying your cash rebate in green to the low interest financing in blue. With this graph you may clearly see the impact both discounts will have on the price of the car and the repayment of the loan.
The next tab, payment schedule, provides a detailed analysis of all the loan repayments considering each offer. This allows you to compare your loan payments across a longer period of time to see how much interest you pay respective to your options.
Without this essential information you may never know which incentive will provide the most financial benefit. These incentives are a great way to get to get a valuable price deduction on a certain vehicle and can have a big impact on your monthly payment. Make sure to pay attention to the fine print and when the incentives are offered so you don’t miss out on the opportunity. Remember to book mark this calculator or save it to the home screen of your smart phone or tablet to keep this great tool at you fingertips.
Being aware of the laws regarding rebates in your state is very important, as applying a rebate before tax can have the great benefit of saving you hundreds of tax dollars.