A cash allowance is also known as a manufacturer's rebate or a new-car incentive. It is an automatic discount off a new car's manufacturer's suggested retail price, or MSRP.
Time Frame
Cash incentives are usually good until the beginning of the following month. Manufacturers offer incentives that change every month. You can find out how long the cash back is good until by going to the manufacturer's website.
Significance
Cash incentives increase customer interest and promote more business for the dealership. Because dealerships do not know the manufacturer's incentives for the upcoming month, a sense of urgency is created for the buyer. Most dealerships sell more cars at the end of the month than in the beginning for this reason.
Misconceptions
Depending on which state you live in, the cash incentive you receive may still be taxable. The state of New York, for example, taxes the full MSRP of the vehicle before subtracting the cash incentive. The state of North Carolina does not. Many assume that tax is added to the discounted price, while this is not always true.
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