How to handle cash back offers on new cars

March 22, 2012 12:00 AM

Many automakers offer incentives and rebates in order to stimulate sales on less-popular models, and this can be a great way for car shoppers to find a good deal. However, buyers need to be wary when negotiating special interest rates or cash back offers, reports the Chicago Tribune.

Cash back offers are popular, but drivers often end up paying too much for their car even with these rebates. This is because they don't realize the rebate comes from the manufacturer, not the dealer. A salesman may point to a big rebate and say he has no negotiating room after that, but this isn't the case. The dealer isn't paying for the rebate, so he still stands to make a profit on the car.

"Get your best price first, and don't tip your hand if you're going to take the rebate or special financing," Jack Gillis, public affairs director for the Consumer Federation of America, told the news source. "Look for the fine print. Whenever you have substantial incentives consumers need to be aware of increased inflexibility of price. The bottom line is there's no free lunch. Somebody ultimately will have to pay for zero-percent financing. Usually it's the consumer."

One idea is to use the rebate you get on auto maintenance in the future. A new car may be covered for several years under warranty, but car repairs can get expensive after that. Putting the rebate money into a savings account and ensuring you have something in case the car needs work done is a smart move.

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