Car Employee Discount Basics

If you’ve seen car advertising lately, you’ve almost certainly heard dealerships offering the general public the same discounted price that its employees pay. If you’re considering buying a new car in the near future, it’s important to know how the employee discount works, its benefits and drawbacks and whether or not it’s right for you.

How does it work?

Before you take advantage of any deal — especially for an investment as significant as a new car — it’s vital to know how it works, both on the backend and for you. Thankfully, the employee discount is fairly straightforward. When a dealership takes possession of a vehicle from the manufacturer, they pay what’s known as the invoice price for the car. Sometimes, they then subtract a manufacturer rebate known as the holdback.

Normally, the dealership then marks the vehicle up so they can sell it for a profit. Even though employee discounts vary by dealership and manufacturer, Autobytel states that most discounts lower the sticker price to the invoice cost. Depending on the vehicle, location and offer, this can potentially save you thousands of dollars.

The benefits

The most obvious upside to taking advantage of a publicly-available employee discount is that it can save you money, making a quality vehicle more attainable. In fact, writer Kelsey Mays found some price reductions in excess of $11,000 for the upper trim levels of some SUVs, and 22.4 percent off certain trucks. In some cases, you may be able to combine the employee discount with other promotions, shaving even more off the asking price.

Less tangible, but still a boon is the fact that you get to skip right over all of the stress and pressure involved in negotiating. Autobytel says that most of the time, you can secure a comparable price by diving deep into dealership-by-dealership price comparisons and a healthy dose of haggling. However, that requires considerably more work than just going with the employee cost, and may not ultimately net you the same discount.

The drawbacks

There’s no real downside to saving money, but you may have to jump through a few hoops in order to take advantage of an employee discount. The first is that the promotion may not apply to every vehicle on the lot, so you may have to narrow your search to a much smaller number of options. Mays says that usually vehicles eligible for the discount are from an outgoing model year. If the car you had your heart set on isn’t on the list, you may have to compromise or risk losing the discount. Additionally, if you happen to love the negotiation phase of the buying process, you’ll need to let it go.

Some dealerships and manufacturers will also ask you to finance through them in order to take advantage of the full employee discount. It’s an important factor to consider if you’re more comfortable getting a loan through your trusted financial institution. Moreover, financing outside of the dealership doesn’t necessarily mean that you’re ineligible for the price reduction. Lauren Langille, a brand spokeswoman for General Motors, told that in some cases, it simply means that the discount will be less significant.

If you’re looking for a way to save money on a new car, an employee discount may be the answer you’ve been looking for. For an expert opinion on whether an employee discount is right for you, speak with a trusted financial advisor.

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