When I recently mused that buying a used car isn't automatically the best bargain, several readers pointed out that I forgot to mention manufacturers' incentives, which can make a new car a sensible purchase. It seems all of those "Cash Back!" and "0% Financing!" banners hanging everywhere obscured my vision.
It's true. A really good offer, in some instances, may tip the balance in favor of buying a new car, especially if there's an incentive available for a model you were already considering. These incentives have become more common than dirty socks in a college dorm. Don't automatically assume they mean a great buy, but do factor them into the equation when you're weighing a car-buying decision.
Which flavor?
National purchase incentives typically come in one of two flavors -- low-rate financing or cash back. Sometimes, you'll get to pick whether you want vanilla or chocolate. Other times, you'll get what your dealer gives you. Take a look at this Cars.com compilation of rebates and financing incentives, and you'll see that consumers have quite a pile of offers to compare.
Incentives can be an effective way for carmakers to move a less-than-popular model. For that reason, you may not find incentives where you want them. If you've been following the competition among carmakers, you probably already know that General Motors
If you decide that cash back is too good to turn down, your money might arrive as a standard rebate check, sent to you in the mail after you've purchased the vehicle. As an alternative, the discount might be subtracted from the purchase price of the car. Another form of the cash-back incentive comes packaged as a loyalty reward for buyers who stick with a manufacturer or switch over from a competitor.
Financing incentives aren't as straightforward. A reduced interest rate on a car loan may be quite low -- sometimes as low as 0%. Remember that a credit offer will depend on your qualification for those good terms.
You'll have a much easier time sizing up a financing offer if you've done your homework before you enter a dealership. Shop around for car financing on your own. See what kind of terms you can get from your local bank or credit union. Don't just look at the interest rate. Compare the related fees and terms, and be especially careful of all of the fine print in your dealership's offer.
Foolish advice
If you use incentives to your best advantage, you may get quite a good deal on a new car. The Dodge Grand Caravan, mentioned in my previous column as an example of a used-car bargain, currently comes with $4,000 cash back or a 0% financing offer for consumers who purchase the 2007 model. That cash-back incentive goes pretty far in closing the price gap between a new and a late-model used minivan.
But here's the catch: Even the most generous incentive will not automatically get you a good bargain. You'll still need to negotiate your new car's price. Ignore incentives until the very end to get the best deal you can.
That's not a problem for natural-born-dealmakers who think haggling should be an Olympic sport. But it's worse news for people who break out in hives fearing they'll get hosed just by walking through a dealership's doors. Fortunately, there's more information about car pricing available now at your fingertips than probably at any other time in our motoring history.
You can learn how to price vehicles in the Fool's own car-buying center. For comparison's sake, take a look at sellers like CarMax
To be safe, don't start talking price until you've done all of your homework. You'll be more likely to drive off with a deal in the end.
Related Foolishness:
Fool contributor Mary Dalrymple avoids hives whenever she can, and she does not own stock in any company mentioned in this article. She welcomes your feedback. CarMax is an Inside Value recommendation. The Motley Fool has a blemish-free disclosure policy.
