By Shannon Bradley | NerdWallet
Car incentives almost disappeared in recent years due to supply chain issues from the pandemic for car manufacturers. As vehicle supplies decreased and demand exceeded supply, car makers had no reason to offer incentives such as rebates or low-rate financing. The good news is that car incentives, although still not as high as before the pandemic, are beginning to come back.
According to Kelley Blue Book, a Cox Automotive company, car incentives — as a percentage of the average new-vehicle price buyers paid — reached 5.9% in February 2024. This is compared to a typical range of 10% to 11% before COVID-19 and 2% in the fall of 2022. In February, car manufacturers spent an average of $2,808 per vehicle in incentives, which is up 88% from a year ago.
With supplies returning to normal and some car manufacturers once again improving deals to sell vehicles, here’s how you can find and potentially save with car incentives.
Tips for saving with car incentives
Even though new car prices have decreased since peaking in late 2022, the typical price a buyer pays remains around $47,000. Incentives are one way to reduce that price, and various strategies can help maximize savings.
Be adaptable about the vehicle you purchase
Traditionally, car dealers aim to have 60 days' worth of cars in stock. As car production has resumed, some manufacturers — like Toyota — still have considerably less than 60 days' worth, while others — including Ford, Nissan, and Buick — have excess stock and are more likely to offer incentives and discounts to sell cars.
“The key right now is to be flexible about which car you consider,” says Sean Tucker, senior editor for data company Cox Automotive. “If you had your heart set on something from Toyota, you’re probably not going to find a great deal. They just don’t have trouble selling cars right now.”
Car manufacturer websites are a good place to research car deals and incentives — including cash rebates, low-rate financing, and lease deals — that are available for various makes and models. Such incentives often vary regionally, so you can usually narrow a search by ZIP code. Also, car research companies like Edmunds maintain webpages with current car deals and incentives by carmaker.
Tucker suggests that incentives for leasing and electric vehicles are both good sources for saving in the current market. Car dealerships are working to bring back the leasing cycle that supports the used car market, so many dealerships are offering lease deals.
“It’s actually relatively easy right now to get a good lease on an EV,” Tucker says. “And that might even be a good idea just from a technology standpoint because three years from now, when your lease is likely coming up, there may be far better EVs on the market.”
Know what incentives you qualify for
To ensure you receive every incentive available to you, know exactly which incentives you qualify for before engaging with a car dealer. Joseph Yoon, consumer insights analyst at Edmunds, suggests informing the dealer upfront about what incentives you expect.
Yoon says that the dealer won't give you the offer unless they are very desperate to close the deal.
As part of your research, be aware of the different types of incentives available, because in some cases they can be combined.
- Auto rebates give you a certain amount of money to reduce your overall cost of buying, financing or leasing a vehicle. The rebate reduction should be on top of any other discount you’ve negotiated.
- Low-rate financing is an incentive offered by automaker captive lenders. automaker captive lenders — although you’ll need to have good or excellent credit to qualify and may be limited on loan length. As of March 5, 2024, Cox Automotive reported that 14.2% of new vehicle financing transactions had an APR of 3% or less. Only 3.2% of transactions had a 0% APR. While low-rate offers are available, they aren’t plentiful.
- If you already own a certain car brand and want to buy or lease another one from the same manufacturer, you may qualify for loyalty incentives.
- Demographic-focused incentives — for example, if you’re a recent college graduate, military member or educator — are also offered by some auto manufacturers and dealers.
Using more than one incentive, if possible, can help you take advantage of every dollar available to you. If you have to choose between multiple incentives, for example, either a rebate or low rate from the same manufacturer, use an auto loan calculator to run each scenario and see which will save you the most money in the long run. Also, consider whether taking a cash rebate at the dealer and financing elsewhere could save you even more. If you buy or lease an EV, combining manufacturer and other incentives can lead to significant savings. If you and the vehicle qualify, you can claim the federal EV tax credit of up to $7,500. Additionally, you may find EV incentives from your electric company or state and local governments. The Energy Department’s Alternative Fuels Data Center allows users to search and filter by state and utility/private incentives. auto loan calculator
federal EV tax credit The tax credit for electric vehicles provided by the federal government of up to $7,500. In addition, you might find incentives for electric vehicles from your electric company or from state and local governments. The Alternative Fuels Data Center of the Energy Department allows users to search for incentives by state and utility/private. “There’s still a bit of inventory left from 2023 that they really, really, really want to get rid of as the 2024 models [are starting to] hit,” Yoon says. This motivates auto manufacturers and dealers to offer savings on top of the federal incentive. Plan to negotiate and comparison shop If you know you qualify for a $1,500 car rebate, don’t assume that’s the best you can do — even if the dealer tells you it is. The ability to negotiate car prices for some models has also reappeared, and incentives should be in addition to any amount you negotiate off the manufacturer’s suggested retail price. You can use valuation tools on car-buying sites to see what people are paying for the car you want and whether negotiating a lower price is realistic.
Finally, if you can find more than one dealership with the vehicle you want, present the deal you expect to each and let them compete for your business. Dealers receive factory-to-dealer discounts to help move certain vehicles, usually slower-selling ones. They can choose whether to pass these savings on to you and may be more motivated to do so if they know you’re shopping for the same car elsewhere.
Yoon suggests that if a car dealership is not willing to cooperate, you should not hesitate to leave. He believes that cars are more expensive than ever for consumers, so it is important to fight for every dollar you can save.
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As Car Incentives Return, Here’s How to Find Them and Save Money
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