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How Do I Decide if a Deal Is Right for Me?
Shopping for new-car discounts can introduce a lot of confusing terminology. Not to worry: Each month, we’ll highlight the best cash and financing deals among today’s popular models. To determine the best deal for you, you’ll need to consider the terms of the discount — whether it’s a cash rebate, discount financing or some combination therein — and decide what lowers the cost of your prospective car the most.
What Are Cash Rebates, Factory Cash or Cash Back?
Whether they go by cash rebates, factory cash or cash back — or some other related phrase — cash offers function as direct discounts off a car’s price. They’re generally available to all shoppers regardless of credit ratings, though they aren’t always available on all examples of a given model.
Cash offers might be restricted to all but the lowest trim; in the same vein, certain performance or luxury variants might be exempt. Make sure to read the fine print, and take any sky-high offers with a dose of skepticism. It’s possible they’re limited to a hard-to-find outgoing model year or only a certain percentage of dealer inventory.
It’s also important to frame any given offer against the overall price of the car. After all, $3,000 off a Chevrolet Equinox is a much higher percentage discount than $3,000 off a Chevrolet Tahoe. Always calculate the discount as a percentage off the total vehicle price — out the door, including all taxes and fees, if possible.
Some brands make it easier by advertising cash discounts as a percentage off the manufacturer’s suggested retail price, but you’ll need to consider a few customary fees beyond the MSRP, such as the destination charge and the documentation and license fees. Pay full price on those, and your percentage savings out the door will be a little bit lower than the advertised discount.
Finally, remember that some cash offers may require you to finance at standard rates with the automaker’s lending arm — groups like Ford Credit, Toyota Financial Services, GM Financial and the like. That eliminates the option of financing your purchase with third parties like a bank or credit union, and it may result in a higher interest rate because you can’t shop competing lenders.
Just because you see such an offer doesn’t mean you have to take it. It’s still worth shopping among third-party lenders to see what your interest rate elsewhere might be. If the automaker presents you with a substantially worse rate to get the additional cash offer, use Cars.com’s Car Loan Calculator to decide if it’s worth it.
What Is 0% Financing?
Most new-car shoppers still finance their purchase, even after substantial cash discounts. As an alternative, discount financing offers — sometimes called discount or special APR (annual percentage rate) — give a subsidized interest rate in lieu of big cash bonuses. Sometimes they work out to the same monthly payment: Say a cash discount knocks $4,000 off a car that’s $34,000 out the door, leaving you with $30,000 to finance. You qualify for a standard interest rate of 5% on a 60-month loan, working out to a monthly payment of $566. But in lieu of that $4,000, the automaker is also offering discount financing at 0% for 60 months. Financing the full $34,000 at such terms works out to $567 per month, or virtually the same payment. You’ll have to decide what works best.
In virtually every case, automakers restrict discount financing offers to creditworthy shoppers, with the plummest deals reserved for those with sterling FICO scores. Bankrate notes that only about 1 in 10 shoppers qualify for 0% loans, so check your credit score before you go and set your expectations accordingly.
The good news is that finance rates, like many other aspects of car buying, are negotiable. A red-hot APR deal for the creditworthy few may still mean lower-than-normal rates for other shoppers.
What’s Bonus Cash?
Automakers seldom allow you to combine discount financing with the full cash offer — meaning, in the above scenario, you can’t get $3,000 off and 0.9% financing. But sometimes automakers offer a hybrid of the two, with discount financing and some (albeit not the maximum) cash discount. Often called “bonus cash,” such offers mix special financing terms with a small amount of cash off.
Credit limitations still apply, but such cases may produce the best deal overall. Again, we recommend using Cars.com’s loan calculators to decide what works best.
What’s Military, College Grad, Loyalty or Conquest Cash?
Although we focus on cash deals available to all shoppers, some consumers may qualify for additional discounts. Automakers generally offer extra cash to first responders, members of the U.S. military and recent college graduates. Additionally, shoppers with cars in the same competitive set as a prospective purchase, or vehicles from the same automaker, may qualify for competitive or loyalty discounts. In some cases, it’s not even necessary to trade those vehicles in as part of the purchase.
You might be able to combine such bonuses with discount financing or cash deals, but specifics will vary. If you fit any of these categories, see your dealer to learn more.
What Are Deferred Payments?
Offered sometimes as a sales promotion, payment deferrals are exactly what they sound like: a holiday, lasting one to several months, from making car payments.
Make sure to read the fine print, however. Some deferred payments are actually payments the automaker makes — often expressed as payments made “on us” — which function as a discount off the financed amount of your loan. Others are simply deferred payments tacked onto the end of the loan. That may offer some relief in the near-term, but you’ll be responsible for them on the back end.
What’s a Lease Deal?
About a third of new-car purchases are leased, but such deals vary by region depending on trim popularity and residual values. Because of such widespread variances and limited accounting of what a lease should cost at full price (and, thus, how much of a deal any particular offer really is), we devote most of the coverage here to cash and finance deals. That said, if you’re looking to lease, read our primers on how leasing a car works and how much it costs to lease a car. We also have a glossary of car-leasing terms.
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