What is Cashback?

I think the key point is who it comes from. A manufacturer sells the car to a dealer who can then sell it on at whatever price he gets for it. Cashback usually comes direct from the manufacturer. So it is an easy way for them to cut prices for a limited time without altering brochures or list prices. Punters also like it because it can pay next months credit card bill when you have just overstretched by buying a new car.

Neb

A reduction in list price also comes from the manufacturer. I've not actually been looking for a car when one has a manufacturer rebate, but it would worry me that the dealer would use the existence of the rebate to reduce the discount that he will give me and I will be no better off.

Valid point, but brochures don't usually include prices, these come on a tatty photocopied sheet that's stuffed in the back (if you're lucky).

These people are different from me then, they must fall for the psychology, as it makes no 'real' difference to their finances. Personally I'd prefer to avoid jumping through the necessary hoops and having to wait for the cheque, just taking it off the amount I have to hand over seems far simpler.

tim

Its supposed to do the reverse. If the manufacturer cuts 1000 the dealer may give 800 and keep 200. As it comes straight from the manufacturer you should be able to negotiate just as hard with the cashback there. Of course I don't actually know how it works. Knowing the way some companies treat wholesalers they may say. 'We're putting on a big promotion. It's costing us millions. You'll sell lots more cars, so we're cutting your margin by 200.'

Prices are widely advertised though they may not be in the same brochures. A lot of the motoring magazines carry them for instance.

Of course it is an imaginary difference rather than a real one, but it does seem to work. Its not just cars. You get it for houses, washing machines, even some foods. I guess people wouldn't do it if it didn't work. I think it is more eyecatching. 'Now with 500 cashback' sounds better than. 'We've too many cars so we've dropped the price.

Neb

I think the attraction is that most people are buying with a loan, so the cashback is effectively rolling an extra loan in with that to give them some spending money. The majority of people look at costs in terms of monthly payments, not total amounts - the whole structure of consumer credit would collapse if they didn't!

That must have got them scratching their heads..