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Compare dealer cash back rebates vs low interest financing to find which car deal saves you the most money
Expert financial calculator • Updated December 2024 • Free to use
When buying a car, dealers often offer two types of incentives: cash back rebates or low interest rate financing. Cash back gives you an immediate discount on the vehicle price (typically $500-$5,000), but you finance at a standard interest rate (usually 5-8% APR). Low interest financing offers a promotional rate (often 0-2.9% APR) but you pay the full vehicle price without any rebate.
Our calculator helps you compare these options side-by-side to determine which saves you more money over the life of your loan. It factors in the reduced loan amount from cash back versus the interest savings from the lower rate, showing you the total cost, monthly payments, break-even point, and exact savings of each option.
Start by entering the vehicle's price (MSRP or negotiated price) and your down payment amount. The calculator supports vehicles from $10,000 to $80,000. A larger down payment reduces both loan amounts and makes the comparison more accurate for your specific situation.
Choose your desired loan term from 3 to 7 years (36-84 months). Loan term significantly impacts which option is better. Longer terms favor low interest rates because you save on interest over more months. Shorter terms often favor cash back because there's less time to accumulate interest savings.
Input the cash back rebate amount offered by the dealer (typically $500-$5,000) and the standard interest rate you'd pay with this option (usually 5-8% APR). The calculator immediately shows your reduced loan amount, monthly payment, and total cost with the cash back option.
Enter the promotional interest rate offered (often 0-2.9% APR). The calculator compares this against the cash back option, showing you monthly payments, total interest saved, and total cost. A clear winner badge indicates which option saves you more money, along with the exact savings amount.
Compare both options simultaneously with clear visual indicators showing monthly payments, total costs, and which deal wins.
Instant recommendation with highlighted winner badge showing exactly how much you save by choosing the better option.
See the exact month when low interest savings equal the cash back amount, helping you decide if early payoff makes sense.
View complete month-by-month payment breakdowns for both scenarios with principal, interest, and balance tracking.
Personalized recommendations based on your loan term, rate difference, and rebate amount with actionable advice.
Interactive charts and color-coded displays make it easy to understand total costs and interest differences at a glance.
Option to apply cash back before or after sales tax, showing additional tax savings in states that allow it.
Download complete amortization schedules for both options as CSV files for your records and further analysis.
Cash back rebates are immediate discounts offered by manufacturers or dealers, typically ranging from $500 to $5,000. This rebate is subtracted from the vehicle price before calculating your loan amount. For example, on a $30,000 car with a $3,000 rebate, you only finance $27,000 (plus taxes and fees, minus down payment). The advantage is a lower loan amount and monthly payment, but you'll pay a standard interest rate (usually 5-8% APR).
Low interest financing offers promotional rates, often 0%, 0.9%, 1.9%, or 2.9% APR, significantly below standard rates. You finance the full vehicle price without any rebate, but you save substantially on interest over the loan term. For longer loans (60-72 months), these interest savings can exceed the value of cash back rebates. However, these promotional rates typically require excellent credit (720+ score).
The break-even point is the number of months it takes for the cumulative interest savings from the low rate to equal the cash back rebate amount. If you plan to keep the loan past this point, low interest wins. If you'll pay off early (before break-even), cash back is better. Our calculator shows this break-even month clearly, helping you make the right decision based on your payoff plans.
Vehicle Price: $30,000
Down Payment: $5,000
Loan Term: 48 months
Option A: $3,000 cash back at 5.9% APR
Option B: No rebate at 3.9% APR
Result: Cash back saves $60 total with lower monthly payments ($467 vs $471)
Vehicle Price: $35,000
Down Payment: $5,000
Loan Term: 72 months
Option A: $2,000 cash back at 6.9% APR
Option B: No rebate at 1.9% APR
Result: Low interest saves $3,008 total despite higher monthly payment ($456 vs $449)
Vehicle Price: $40,000
Down Payment: $8,000
Loan Term: 60 months
Option A: $4,000 cash back at 5.5% APR
Option B: No rebate at 0% APR
Result: 0% APR saves $3,920 total (pays zero interest vs $4,920 with cash back)
Get pre-approved from your bank or credit union before visiting dealers. This tells you your actual interest rate and helps you determine if the promotional rate is truly better than cash back.
Use our calculator to find the break-even month. If you plan to pay off before that point, cash back is better. If you'll keep the loan longer, low interest wins.
Longer terms (60-72 months) favor low interest because savings compound over time. Shorter terms (36-48 months) often favor cash back because there's less time to accumulate interest savings.
Some states apply sales tax after the rebate, saving you 5-10% of the rebate amount in taxes. Check your state's rules and use our calculator's tax option for accurate comparisons.
Promotional rates require excellent credit (720+). If you don't qualify, you'll get a higher rate, making cash back more attractive. Check your score before deciding.
If you might pay off early, cash back is often better because you won't benefit from long-term interest savings. Consider your financial plans for the next few years.
Test different loan terms and down payments in our calculator. Sometimes a different term length can flip which option is better, revealing the optimal financing strategy.
Negotiate the vehicle price first, then choose between incentives. Don't let dealers confuse you by mixing price negotiation with financing options.
Dealers often emphasize monthly payment to distract from total cost. A lower monthly payment with cash back might cost more overall than a slightly higher payment with low interest. Always compare total costs, not just monthly payments.
The option with the lower monthly payment isn't always cheaper overall. Our calculator shows total cost including all interest payments, which is what really matters for your wallet.
If you plan to pay off your loan early, you won't benefit from the full interest savings of the low rate. Check the break-even point in our calculator to make the right choice for your payoff timeline.
In some states, sales tax is calculated after the rebate, giving you additional savings. This can add $150-$500 to the value of cash back. Use our calculator's tax option to factor this in.
A cash back vs low interest calculator helps car buyers compare two common dealer incentives: immediate cash back rebates versus promotional low interest rate financing. It calculates the total cost of each option, including all interest payments, to show which deal saves you more money over the loan term.
The better option depends on several factors: loan term length, the size of the cash back rebate, the interest rate difference, and your loan amount. Generally, low interest rates are better for longer loan terms (60+ months) and larger loans, while cash back is better for shorter terms (36-48 months) or when the rate difference is small (less than 2%). Our calculator shows you exactly which saves more.
The break-even point is the number of months it takes for the interest savings from the low-rate option to equal the cash back rebate amount. If you plan to pay off your loan before the break-even point, cash back is usually better. If you'll keep the loan longer, low interest typically wins. Our calculator shows this break-even month clearly.
0% APR financing is often the best deal, especially for longer loan terms (60-72 months), because you pay zero interest. However, if the cash back rebate is very large (e.g., $5,000+) and you're financing a small amount for a short term (36 months), cash back might save more. Use our calculator to compare your specific scenario and see which option works best for your situation.
The cash back rebate directly reduces your loan amount. For example, if you're buying a $30,000 car with a $3,000 rebate and putting $5,000 down, your loan amount becomes $22,000 instead of $25,000. This lower loan amount means lower monthly payments and less total interest paid, even at a higher interest rate.
Typically, dealers offer either cash back OR low interest financing as mutually exclusive incentives - you choose one. However, you can often negotiate the vehicle price separately from these manufacturer incentives. The promotional interest rate and cash rebate usually cannot be combined on the same purchase, but policies may vary by manufacturer and dealer.
Yes, significantly. Low interest promotional rates (like 0-2.9% APR) usually require excellent credit (720+). If you don't qualify for the promotional rate, you'll get a higher standard rate, making cash back more attractive. Always get pre-approved to know your actual rate before comparing options.
Sales tax can be calculated on the full vehicle price or after the cash back rebate, depending on your state. If your state applies tax after the rebate, cash back saves you additional money on taxes (typically 5-10% of the rebate amount). Our calculator includes an option to factor in this tax treatment for accurate comparisons.
If you plan to pay off your loan early, cash back is often better because you won't benefit from the long-term interest savings of the low rate. The break-even analysis in our calculator helps you see exactly when the low interest option starts saving more money. If you'll pay off before that point, take the cash back.
Savings vary widely based on your specific situation. For a $30,000 car over 60 months, choosing the right option can save anywhere from $500 to $3,000 or more. Larger loans, longer terms, and bigger rate differences create larger savings opportunities. Our calculator shows your exact savings for your specific scenario.
Cash back rebates typically range from $500 to $5,000, depending on the vehicle make, model, and time of year. End-of-year clearances and slow-selling models often have larger rebates ($3,000-$5,000), while popular models may have smaller rebates ($500-$2,000). Luxury vehicles sometimes offer even larger rebates ($5,000-$10,000).
Yes, most dealers allow you to apply the cash back rebate as part of your down payment, which further reduces your loan amount. This is a smart strategy because it lowers your monthly payment and total interest paid. Some buyers prefer to take the rebate as cash to use for other purposes, but applying it to the loan is usually more financially beneficial.
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