What Does Cashback Mean When Buying a Car?

What Is Cashback on a New Car?

Cashback is a rebate offered by the vehicle manufacturer to encourage people to buy new cars with special offers. You might also hear it called bonus cash, customer cash, or a cash allowance. While the names can change, the idea is the same. The manufacturer provides money that can be used to reduce the cost of the vehicle.

In most cases, you do not actually walk out of the dealership with a stack of cash. Instead, the cashback amount is applied to the purchase price of the car, similar to a down payment. This lowers the amount you need to finance or pay out of pocket. If you want to receive the rebate as a check instead, that is usually an option, but you have to let the dealership know so the correct paperwork can be completed.

Either way, the money comes from the manufacturer, not the dealer. The dealership helps process it, but the incentive is part of a larger program designed to help move certain vehicles.

Why Do Manufacturers Offer Cashback?

Cashback is mainly used to help sell specific models or trims. When a new model year arrives, the previous year’s vehicles are still sitting on lots. To make room, manufacturers may offer rebates to encourage buyers to choose those remaining cars. The same thing can happen during major sales periods like holiday events or seasonal promotions.

Because of this, cashback is usually not available on every vehicle. It is tied to certain models, trims, or even specific production runs. That is why two similar cars on the same lot may have very different incentives attached to them.

How Cashback Affects Your Loan and Payment

When you apply a rebate to the purchase price, it reduces how much you need to borrow. For example, if a car costs $30,000 and you receive $3,000 in cashback, you are only financing $27,000 before taxes and fees. That lower loan amount can reduce your monthly payment and the total interest you pay over time.

Some buyers choose to receive the cashback as a check instead. This gives you flexibility to use the money for other expenses, but it does not lower the loan balance unless you put that money back into the car.

Either option can make sense depending on your budget, but most shoppers prefer applying it to the vehicle to see an immediate impact.

0% APR vs. Cashback

Many buyers are faced with a choice between low-interest financing and a cashback offer. Both can save money, but they work in different ways.

With cashback, you save money up front by lowering the total cost of the vehicle. That means you borrow less and pay interest on a smaller amount. In some situations, this can lead to more overall savings than a low interest rate.

With a low or 0% APR offer, you pay little or no interest over the life of the loan. More of each payment goes directly toward the vehicle instead of interest. This can be helpful if you plan to keep the car for many years and make regular payments.

Both offers are usually tied to specific vehicles, so availability matters. It is also important to compare the total cost over time, not just the monthly payment.

How to Get the Most Out of Cashback

One key tip is to negotiate the price of the car before applying the rebate. The sale price and the cashback are separate. If you agree to a fair price first, then apply the rebate, you can often get more value overall. Also, make sure to ask what other rebates you qualify for, like the Military, First Responders, and College Grad Programs offered at our dealership. You might be eligible for more than one, which can add up.