Incentives and Rebates

Incentives and Rebates are programs offered to consumers or dealers to stimulate new car sales. The four most common programs are Cash Rebates, Low Interest Financing, Special Leases and Marketing Support.

Cash Rebates, Low Interest Financing and Special Leases are provided directly to the consumers. Eligibility requirements may vary, and not all consumers may qualify.

Marketing Support is provided directly to the dealers, and the benefit may or may not be passed on to consumers. Marketing Support programs take many forms, but the most common type is Dealer Cash.

Please note that incentive programs are subject to change at any time by manufacturers. Edmunds publishes such changes on a daily basis; however, there may be a short delay between the time a manufacturer discloses a change and the time we publish the update.

For definitions of any Incentives and Rebates terms, please see the glossary below:

Acquisition Fee
Also known as a "bank fee," an "administrative fee" or an "assignment fee." For a vehicle lease, a fee charged by the leasing company at the inception of the lease that is intended to cover a variety of administrative costs, such as obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease into its data and accounting systems.

Cash Rebates
Rebates provided by the manufacturer directly to the customer at the time the vehicle is purchased to lower the final price of the vehicle. Consumers usually may elect to either receive this amount in cash or to credit the rebate as part of the vehicle's down payment.

Dealer Cash Incentives
Are typically paid to the dealers by the manufacturers to stimulate sales momentum or reduce inventory pressure for certain vehicles. There are many variations, but the most common dealer cash incentive structure provides a cash credit to the dealer upon the sale of a vehicle in the program. In other cases, dealers earn cash bonuses when they achieve sales volume targets. However, there are also programs where dealers earn the incentive upon purchasing the vehicle from the manufacturer. These programs vary widely, but in all cases the Edmunds.com True Market Value Prices have taken these cash incentives into account.

Disposition Fee
An amount charged by the leasing company at the end of a lease that is intended to cover the cost of retrieving and selling the vehicle if the lessee chooses not to buy it. The amount, which varies by leasing company, is disclosed in the lease agreement. The lessee is billed for this charge after the vehicle is returned.

Down Payment
A cash payment credited against the purchase price of a vehicle, which reduces the amount to be financed. In a lease transaction, this amount is often referred to as the "capital reduction."

Finance Rate (APR)
For a vehicle purchase, the cost of credit (i.e., the interest rate) expressed as an annual rate.

Incentives and Rebates
An auto industry term that encompasses all methods by which manufacturers attempt to stimulate vehicle sales and leases by reducing the net cost to consumers without reducing the vehicles' MSRPs, which includes customer rebates, dealer cash incentives and special leases.

Lease Term
The number of months that constitute the term of a vehicle lease.

Low-Interest Financing
A loan offered by the manufacturer's captive finance company at a below-market interest rate. Eligibility is normally determined based on the customer's creditworthiness.

Marketing Support
An auto industry term that describes programs that manufacturers provide to stimulate sales or assist dealers in the advertising and marketing of their vehicles. The most common program is Dealer Cash Incentives.

Mileage Allowance
In a vehicle lease, the number of miles the lessee is permitted to drive over the term of the lease without incurring an excess mileage penalty. If a customer expects to drive more miles than the standard lease allows, it may be beneficial to buy the right to drive additional miles at the inception of the lease (which will have the effect of reducing the Residual Value and thus raises the monthly payment), as opposed to paying a mileage penalty at the end of the lease.

Money Factor
Also referred to as a "lease factor" or "lease fee." An auto leasing industry term for expressing the interest rate used to calculate the monthly lease payment, and equal to the lease's APR divided by 2,400. (For example, an APR of 7.2% equals a money factor of 0.0033.)

Residual Value
A vehicle leasing company's assumption of what a vehicle will be worth at the end of the lease, which is a factor used to determine the monthly lease payment. (The higher the residual value, the lower the monthly payment.)

Security Deposit
A payment required at the inception of a vehicle lease to provide collateral to the leasing company for the lessee's promise to comply with the terms of the lease. Any unused amount is refunded to the lessee at the end of the lease term.

Special Leases
Also referred to as a "subsidized lease" or "subvented lease." A form of "incentive and rebate" that consists of a vehicle lease offered by a vehicle manufacturer in which the amount of the monthly payment is reduced below that then offered by independent leasing companies (the cost of which is absorbed by the manufacturer). Typically this is accomplished by using a higher residual value or a lower interest rate, or both.

Total Due at Signing
Also referred to as "Drive-off fees." The total cost that must be paid by the lessee at the inception of a vehicle lease, which typically includes the first month's lease payment, any security deposit required by the leasing company, any acquisition fee charged by the leasing company, any documentation fees charged by the dealer, and various state registration fees.

Have more questions? Submit a request

0 Comments

Please sign in to leave a comment.