Also known as a rebate, a cash allowance drops a vehicle's final price at the dealership. Auto manufacturers often offer cash allowances, generally ranging from $500 to up to $10,000, to reduce their inventories, while the government sometimes offers such rebates in connection with military service or student status.
Car dealers apply cash allowances toward the car a consumer is buying, much the same way they apply a down payment or trade-in value. Most cash allowances are given with restrictions, such as a requirement that a consumer lease or purchase a given vehicle during a particular period of time or that he obtain his own financing.
Typically, dealers offer cash allowances during late summer or early fall when they are attempting to empty their lots in anticipation of the release of new models. When one auto manufacturer announces rebates, generally others follow with cash allowances of their own.
At various times in history, the U.S. government has provided cash allowances toward the purchase of new vehicles. The 2009 "Cash for Clunkers" program allowed for $3,500 to $4,500 toward the purchase of a new vehicle provided the trade-in was an older car with low gas mileage. The government reimbursed auto dealers for the amount of the cash allowance.