By Shannon Bradley | NerdWallet
Car incentives almost disappeared in the last few years due to pandemic-related issues in the supply chain for car manufacturers. As the supply of vehicles decreased and demand from consumers exceeded supply, car makers had no reason to offer incentives such as discounts or low-interest financing. The good news is that car incentives, while still not as high as before the pandemic, are starting to come back.
According to Kelley Blue Book, a Cox Automotive company, car incentives – as a percentage of the average price paid by buyers for new vehicles – reached 5.9% in February 2024, compared to the general range of 10% to 11% before COVID-19 and 2% in fall 2022. In February, car manufacturers spent an average of $2,808 per vehicle on incentives, which is an 88% increase from a year ago.
With inventories returning to normal and some car manufacturers once again offering attractive deals to sell vehicles, here's how you can find and potentially save money with car incentives.
Tips for saving with car incentives
Although prices of new cars have decreased since reaching a peak in late 2022, the average price paid by buyers is still around $47,000. Incentives are one way to reduce that price, and certain strategies can help maximize savings.
Be open to different vehicles to buy
Normally, car dealers aim to have 60 days' worth of cars in stock. As car production has resumed, some manufacturers – like Toyota – are still below the 60-day mark, while others – including Ford, Nissan, and Buick – have excess stock and are more likely to offer incentives and discounts to sell cars.
“Right now, the key is to be flexible about the vehicle you consider,” says Sean Tucker, senior editor for data company Cox Automotive. “If you were set on something from Toyota, you probably won’t find a great deal. They have no trouble selling cars right now.”
Auto manufacturer websites are a good place to research auto deals and incentives, including cash rebates, low-interest financing, and lease deals, for different makes and models. These incentives often vary by region, so you can usually narrow down your search by ZIP code. Additionally, auto research companies like Edmunds have webpages with current car deals and incentives by carmaker. Tucker suggests that incentives for leasing and electric vehicles are both good ways to save in the current market. Car dealerships are trying to restore 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 make sure you get every incentive available to you, know exactly which incentives you qualify for before dealing with a car dealer. Joseph Yoon, consumer insights analyst at Edmunds, recommends telling the dealer upfront what incentives you expect.
Yoon says that the dealer won't offer it to you unless they are very desperate to finalize the deal.
As part of your research, make sure to know the various types of incentives available, because in some cases they can be used together.
Auto rebates give a specific amount of money to reduce your total cost of purchasing, financing, or leasing a vehicle. The rebate should be in addition to any other discount you've negotiated.
Low-rate financing is a perk provided by
- captive lenders affiliated with automakers
- — 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 are not abundant. If you already own a particular car brand and want to purchase or lease another one from the same manufacturer, you may be eligible for loyalty incentives. Incentives focused on specific demographics, such as recent college graduates, military members, or educators, are also offered by some auto manufacturers and dealers.
- If possible, stacking more than one incentive can help you utilize every available dollar. 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 evaluate each scenario and determine which option will save you the most money in the long term. Also, consider whether taking a cash rebate at the dealer and financing elsewhere could save you even more. When you purchase 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. Regarding EVs, Yoon mentions that auto manufacturers and dealers are currently motivated to offer additional savings on top of the federal incentive because “there’s still a little bit of inventory left from 2023 that they really, really, really want to get rid of as the 2024 models [are beginning to] hit.” Plan to negotiate and compare prices
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. Lastly, 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 be afraid to leave. Cars are now more expensive than ever, so it's important to negotiate to save as much money as possible.
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The article Use these strategies to locate and save the most with auto incentives. originally appeared on NerdWallet.
