Compare a low-APR financing offer against a cash rebate with a standard APR. See the monthly payment and total cost of each, and which auto deal actually saves you more money.
Which auto offer wins?
Car dealers often make you choose between a manufacturer's low promotional APR (like 0.9% or 1.9%) and a cash rebate that you must finance at a standard market rate. The low APR reduces your interest; the rebate reduces your loan balance but at a higher rate. The winner depends on the size of the rebate, the gap between the two rates, the amount financed, and the loan term.
This calculator computes the monthly payment and total cost (payments plus down payment) for each option so you can see exactly which is cheaper. As a rule, larger rebates and shorter loans favor the cash back, while small rebates with a big rate gap favor the low APR — but always run the numbers, because the answer flips depending on the deal.
The rate gap is large, the loan is long, and the rebate is small. Cheap money beats a modest discount over many months.
The rebate is large or the loan is short. A big upfront discount beats a small interest saving you'd only realize slowly.
Don't just compare monthly payments — compare the total of all payments plus your down payment. That's the true cost of each offer.
Manufacturers frequently offer a choice between a cash rebate and subsidised financing, and the two cannot be compared by instinct because they act on different parts of the transaction. The rebate reduces the amount borrowed immediately; the low rate reduces the cost of borrowing over time. The correct method is to compute the total cost of each path — including the payment stream — and compare. The rebate tends to win on shorter terms and smaller amounts, where there is little interest for the low rate to save, while the subsidised rate wins on longer terms and larger balances.
Option A: finance (Price − Rebate) at the market rateOption B: finance the full Price at the promotional rateCompare total of payments for eachBreak-even depends on term, amount and the rate gapwhere:
Assumptions: The two offers are normally mutually exclusive. Promotional financing usually requires top-tier credit, so confirm eligibility before assuming the comparison applies to you.
A $38,000 vehicle over 60 months, with a market rate of 7.2%.
ResultThe 1.9% financing wins by $1,917 over five years
Shorten the term to 36 months and the answer flips — there is less interest for the low rate to save, so the $3,000 rebate wins — by $103 over 36 months. The comparison is genuinely term-dependent, which is why it must be computed rather than guessed. If you are paying cash, take the rebate: the financing offer is worth nothing to you.