How Does a New Car Rebate Work?

by Jennifer Garcia

Getting Something for Nothing

When purchasing a vehicle from a new-car dealership, it's not uncommon for dealers to advertise new car rebates. They make these rebates sound like money in the bank for new car buyers. It's important to understand exactly how a new car rebate works and to know that just because you are purchasing a new car, that does not mean that you will automatically be given hundreds or even thousands of dollars for simply purchasing a new vehicle. Sticking to the old saying about never getting something for nothing is a good way to keep things in perspective at the dealership. Unless you have a well-thought out plan and have saved money for a down payment, the chances of you actually getting the new car rebates are slim.


The purchase of a new vehicle more often than not requires a down payment. The amount of the down payment varies, depending on how much the vehicle is being sold for. Typically, however, the down payment ranges from 15 to 20 percent of the total purchase price. More often than not, car buyers do not have this sort of money when they go in to purchase a vehicle. In these cases, new car rebates come in handy. A new car rebate is a certain amount of money that the car manufacturer allots a car buyer. Sometimes the rebate can be $500 and sometimes it is more, depending on the purchase price of the vehicle and the amount of money the manufacturer has set aside for the make and model of that vehicle. For high-end vehicles, new car rebates can be as much as $7,000. A car buyer can take the new car rebate and put it towards the down payment, which is usually what happens even if the buyer has a down payment for the car. By applying the rebate to the total down payment amount, the buyer reduces his monthly payments and it looks favorable to lenders. The more a buyer has for a down payment, the better chance he has for getting financed. For example, if the buyer has $1,200 for a down payment and the new car rebate is $500, the total down payment after applying the rebate will be $1,700.

How it Works

Not all car buyers go into a dealership empty handed, though. Some people carefully plan a new car purchase and already have their 15 to 20 percent down payment ready when they walk through the door. In these cases, the car buyer is entitled to any new car rebates that are available on that certain vehicle. When this happens, the car buyer will get a check made out to her for the amount of the rebate. The check is then mailed to the car buyer. This process can take anywhere from four to six weeks. Once the buyer receives the check, he can do with it as he pleases.

About the Author

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