Dealer Incentives Explained

Incentives for customers are not difficult to understand – cash-back rebates, low interest loans for financing and some other perquisites are offered straight to the purchasers. But dealer incentives are more complex although they have the same result of bringing down the bargained price of the car and ultimately benefit the customer.

What Are Dealer Incentives?

These are incentives given to the dealers by the manufacturers. Thereby the dealer pays less than the real price while purchasing the car from the manufacturer. These encouragements offered by the manufacturers differ from one region to another keeping in view the generation of sales of certain specified car models. Another name for these incentives is “spiffs”. It can kick off competition among the dealers as they try to expedite the sale of stocks that have not been selling fast. For example an incentive given to the dealer might work when a certain targeted figure of sales has been reached. With each sale after that the rebate gain for the dealer will be higher.

How Dealer Incentives Can Help You:

It should be clearly understood that the dealers are not obliged to pass these cash benefits to the clients. The incentives for the customers are rightfully theirs but in order to take advantage of the dealer incentives the purchaser will have to do some talking and bargaining.

The encouraging thing is that the incentives give the dealers the right push to go ahead with sales. If the dealer is approaching a sale target he will be more ready to offer a bargain price so as to reach that target quickly. If the buyer is aware of these dealer incentives then it will be easier to use that information to bargain one’s way to a lower price for the car.

Another thing to note is that the dealers pay money to keep the inventory of vehicles in stock. Thus even if the incentive is not accompanying a specific model the dealers can be more flexible in negotiating the price on a car that has been on their shop shelves for maybe two or more months. The longer the car collects dust on the shop shelves the easier is it for the buyer to bargain.

What Else You Should Know About Dealer Incentives:

The incentives offered to dealers vary according to the locale and the region. The incentives offered nationally can be found by clicking on Cars.com but it is not easy for those intending to buy cars to know the precise details of local dealer’s incentives.

It should also be noted that the incentives offered to dealers are not related only to models that lag behind in sales. The car producers often come up with rebate offers to new dealers so that they can build up a client portfolio. Alternatively incentives may be offered to old dealers so that they pick up extra inventory. It is hoped that these moves will ultimately be of benefit to the car shoppers.

There is a difference between incentives for dealers and dealer holdback. The latter is a part of the sale price of car (generally 2% or 3% of either the invoiced price or MSRP) that the manufacturer gives back to a dealer, on a regular basis – it being generally each quarter. It gives a boost to the cash flow of the dealer and is a support to him to keep running. The majority of dealers think that the holdback is their right.