New Vehicle Incentive Programs

By: Robert Thomson


Let's face it; the economy is rough. It's tough times all around, right? At the same time, people are leery of incentives; why would a company offer incentives to buy their product? Don't they lose money on it? Doesn't make sense to a lot of people, especially those with tight budgets that can't afford to get scammed - that is, unless you look at it from the company's prospective.

Car dealerships know that times are tough, but they also know that people still have to drive. Incentives provide bonuses on both sides:

- Car dealerships sell the cars that otherwise might have sat in their lots
- Buyers are able to afford the vehicle they need.

APR Incentives

APR stands for annual percentage rate. The APR of a vehicle is the amount of interest paid, per year, on the loan used to buy the vehicle. The amount of APR incentives can vary from 0% APR to 5.9% or a little more, and are at the discretion of the car manufacturer, not the dealer.

APR incentives are also for a set period (i.e. 36, 48, 60 months); whether you're eligible for APR incentives - as well as the percentage amount - mainly depends on your current credit history.

The key to taking advantage of APR incentives isn't the percentage itself. The key is two-fold:

- Paying as much as you can upfront (rather than financing)
- Making sure your payments are in on time - which everyone wants to do, anyway.

Keep in mind that many APRs are based on each $1000 you finance.

Why would you choose an APR incentive? Simply put, because it lowers the amount of each monthly payment. The lower the APR, the lower the monthly payment. Your overall payments (including APR) are spread out to give you a set amount each month (rather than shifting payments because of rising/falling interest rates).

Cash-based/Bonus Incentives

Cash-based and bonus incentives can also vary, much like the APR incentives, and also depend on the manufacturer. The term "cash incentive" is misleading to many people, however. This does not mean that you buy a car and the dealership gives you $3000 (for example) to go do what you please with.
A simpler way of looking at cash incentives is as a discount on the vehicle. For example, let's say the new vehicle you're buying is $20,000. You have a trade-in vehicle, with a Kelly Blue Book value of $5,000, which drops the price to $15,000. You also have $5,000 in cash, so you're financing $10,000.

Now, the car has a $3,000 cash incentive to buy. That $3,000 is specifically meant to go toward the cost of the car. Basically, the dealership is paying $3,000 of the overall cost of the car, dropping the cost from $20,000 to $17,000. So, at the end of it all, with the trade-in, cash incentive and the cash you brought with you, you end up financing $7,000.

While it might be nice to get the car and have $3,000 extra to spend on something else, you still can't beat that kind of deal.

There are other new vehicle incentive programs, such as rebates; APR and cash incentives are just two examples. When you're looking to buy a new car, make sure you ask the dealership what their current incentives are - and take advantage! It's a win-win situation, so you can't lose.

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