Discount or Rebate - Difference?
Car dealers and manufacturers often advertise rebate programs to help sell new vehicles. Dealers may also advertise price discounts, some of which may be supported by factory-to-dealer rebates that are not made public. Customer may even negotiate extra discounts if they have the time and skill.
If a dealer offers, say, a $2000 discount on a particular model -- or a customer negotiates a $2000 discount -- on a vehicle that is priced at $24,000, the sales contract will show that the vehicle sold at $24,000 minus $2000, which results in a $22,000 sale price. Sales tax (in most states), is based on the discounted $22,000 price.
If you receive a $2000 rebate, instead of a discount, your final price for the vehicle is the same $22,000 as with the discount. However, there's a difference in what you actually pay. When using a rebate, the price of the car doesn't change -- it's not a discount. Therefore, in our example, the price of the car is $24,000 and the sales tax is based on that amount. Then the rebate is deducted.
What does this mean in dollars?
Let's assume that you live in an area with a 9% sales tax. In our example, if you receive a $2000 discount, which reduces the car price to $22,000, you pay $1980 (9% of $22,000) in sales tax for a total of $23,980.
However, if you receive a $2000 rebate (and no discount), your sales tax is $2160 (9% of $24,000). After subtracting your $2000 rebate, you pay $24,160 -- a difference of $180. Therefore, your $2000 rebate really turns out to be only $1820.
If a dealer offers, say, a $2000 discount on a particular model -- or a customer negotiates a $2000 discount -- on a vehicle that is priced at $24,000, the sales contract will show that the vehicle sold at $24,000 minus $2000, which results in a $22,000 sale price. Sales tax (in most states), is based on the discounted $22,000 price.
If you receive a $2000 rebate, instead of a discount, your final price for the vehicle is the same $22,000 as with the discount. However, there's a difference in what you actually pay. When using a rebate, the price of the car doesn't change -- it's not a discount. Therefore, in our example, the price of the car is $24,000 and the sales tax is based on that amount. Then the rebate is deducted.
What does this mean in dollars?
Let's assume that you live in an area with a 9% sales tax. In our example, if you receive a $2000 discount, which reduces the car price to $22,000, you pay $1980 (9% of $22,000) in sales tax for a total of $23,980.
However, if you receive a $2000 rebate (and no discount), your sales tax is $2160 (9% of $24,000). After subtracting your $2000 rebate, you pay $24,160 -- a difference of $180. Therefore, your $2000 rebate really turns out to be only $1820.
posted by Al Hearn at 11:38 AM
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