What’s a factory incentive?

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A factory incentive is a discount offered by car manufacturers to dealers to sell inventory. Rebates are given to customers, while incentives are not always disclosed. Buyers should research incentives and MSRP to get the best deal.

In the automotive world, a factory incentive is a discount offered by the manufacturer to car dealers. This discount can vary significantly, from a few hundred US dollars to a couple of thousand dollars. The factory incentive tends to increase as the year ends, especially if certain car models don’t sell well. Since the manufacturer has a vested interest in selling all of their inventory, they will sometimes be willing to sell it at a lower price to the dealer to make room for inventory for the next year.

There is a difference between a factory rebate or manufacturing rebate and a factory incentive. Refunds are given to the customer. If you buy a certain vehicle, you will either receive X amount of USD, or the car will be offered to the buyer at less than the sticker price. Rebates are widely advertised and mean you’ll see a direct price reduction when you buy a vehicle. Factories can again offer these rebates to quickly move merchandise that is not selling. However, one key difference is that you will be fully aware of the refunds offered to you. It may be more difficult to know if your dealer bought the car and received a factory incentive.

Most dealerships won’t tell you if you bought the car for less than usual, which can make your job as a buyer a little more difficult. Before buying a new car, it’s a good idea to find out if the dealer has factory incentives for the models and types of cars he’s looking at. Please note that this only applies to new cars and not used cars.

There are several Internet sites that can help you find out if factory-to-dealer incentives are currently available on your car. Some of these offer free estimates, like Edmunds, and others charge a small fee like Consumer Reports. Both offer good services to find out if there is a factory incentive on the model you are buying, as the dealer is unlikely to list this incentive. Another thing to look for is the company websites for the cars you are looking to buy. They may have dealer information or news listing current factory incentives.

It is also important to look at the sticker price or the manufacturer’s suggested retail price (MSRP). It is now becoming more common for cars to be tagged with dealer prices, discounts, and any factory incentives on the car. Please note the difference between the actual price and the MSRP. In general, if the car you want is not in high demand, you can probably get the car for around 3% above MSRP. This gives the trader some profit, but not an inflated profit.

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