What Are Car Rebates?
If you’re looking to buy a car and you want to find the best deals, see if you can get a car rebate or similar incentive. Even when car prices are falling, you could still get discounts of several hundred to several thousand dollars, so long as you qualify.
Key takeaways
- Car rebates can be big discounts, but usually only for certain models or vehicles.
- Some buyers, like military or recent graduates, can get special rebates.
- You may have to decide between a rebate or low-interest financing.
What is a rebate on a car?
A car rebate is a price discount that a manufacturer offers as an incentive. New-car dealers may have rebates on specific vehicles, which could be last year’s models or slow-selling trim levels.
There are also rebates for specific groups, such as members of the military or recent college graduates. Some manufacturers also offer rebates on certified pre-owned (CPO) vehicles.
Often, a manufacturer might give a choice between a rebate and low (or even 0%) financing.
How do car rebates work?
Depending on the program, you may receive a check for the rebate, or you can apply it to your down payment, reducing how much you’ll have to pay over the life of the car loan.
In some states, you can apply the rebate to the purchase price before sales taxes are calculated, lowering the amount of tax you’ll have to pay.
Common car rebates
Rebate incentives are usually for specific cars, but many manufacturers have additional bonus offers for certain types of customers.
The different incentive rebates and bonus offers can be combined for additional savings. See if you fall into one of the groups below in order to save even more on your new car.
| Car rebates | How it works | How to qualify |
|---|---|---|
| Loyalty rebates | For customers who buy or lease the same brand of car again. | Present dealer with current registration and title, and sales contract or financing agreement. |
| Conquest | For drivers who switch brands. | This may be reserved for customers who own or lease an eligible vehicle within a specified time period. |
| Military rebates | For those who currently serve in the U.S. military or have been honorably discharged in the past 24 months, as well as their immediate families. | You will need a leave and earning statement (LES) or DD214. You may be asked to use a verification service such as ID.me. |
| Student rebates | For current students and graduates of college or trade school within the past two years. | Submit your student ID, diploma, transcript or letter of enrollment. You may also need to show either proof of employment or a job offer. |
| Educator rebates | For active employees of a public or private school, university or college, as well as their spouses. | Submit a copy of a valid school ID or pay stub from the past 30 days and a copy of a valid driver’s license. |
| First responder rebates | For current firefighters, police, EMT/paramedics, 911 dispatchers and health care professionals. Volunteers may also qualify. | Provide proof of occupation, such as an ID card, professional certifications or a pay stub. You may be asked to use a verification service such as ID.me. |
| EV rebates | All-electric, plug-in hybrid and fuel-cell EVs purchased new in 2023 or later may be eligible for a federal income tax credit of up to $7,500. | The dealer submits a time-of-sale report, which will be accepted or rejected in real time. Qualified buyers of these vehicles can choose to pass on the tax credit to the dealer (to reduce the price of the EV), or else claim the credit on their own tax return. |
Car rebates vs. special financing?
Many times, manufacturers will offer the choice of a rebate or special financing.
With special financing, you pay a lower interest rate than the average, so long as you qualify based on your credit history. However, to get this rate, you must usually get a loan with the manufacturer’s captive finance company, such as Toyota Financial Services or Ford Motor Credit.
The best special financing rates — like 0% APR deals — are reserved for “well-qualified” buyers, meaning those with excellent credit scores, usually 800 or higher.
Keep in mind that incentives like rebates and special financing are offered only on certain vehicles, not the manufacturer’s entire line. The most in-demand vehicles don’t usually need extra help to attract buyers.
Don’t let the offer of a rebate or special financing tempt you into spending more for a vehicle than you can afford. Use an auto loan calculator to compare your options and see what the monthly payments will be like.
Is a car rebate better than a 0% APR offer?
A 0% APR offer may sound great, but it might not always be as good an option as a car rebate.
If you apply the rebate to the down payment, you will pay less for the car overall.
If you take the lower interest rate, you will save with a lower monthly payment, but there might be limited repayment terms (of 36 months, for example), after which your interest rate rises.
Know that you can always take the rebate and then find your own low auto loan rate at a bank, credit union or online lender.
Frequently asked questions
Hybrid cars are in hot demand, so rebates may be rare. Hybrid car rebates are most likely to show up when the maker is introducing a new model or clearing out last year’s inventory.
Some EV manufacturers offer rebates if a vehicle does not qualify for the federal Clean Vehicle Federal Tax Credit.
Auto rebates can help you save on a new car, so long as the rebate applies to the vehicle you want. But don’t let the thought of a sticker-price discount lure you into buying a car that you can’t afford or that won’t suit your needs.
Although manufacturer car rebates are for new vehicles, you might find some other incentives for a used car, especially a CPO vehicle. And if you’re getting a used electric vehicle, there may be both national incentives (such as the Federal Tax Credit for Used Electric Vehicles), as well as state and local rebates.