Cash Back or Low Interest Calculator
A dealer gives you a choice. Take a cash rebate and finance at the standard rate, or skip the rebate and get a low promotional APR. This calculator works out both loans over the same term and tells you which one costs less and by how much.
The rebate comes off the amount you finance. The down payment and the term are the same in both options.
Cheaper option
The promotional rate, by $1,516.68
With the rebate at 7% you pay $30,889.89 over 60 months. At 1.9% without the rebate you pay $29,373.21.
| Rebate at 7% | No rebate at 1.9% | |
|---|---|---|
| Amount financed | $26,000.00 | $28,000.00 |
| Monthly payment | $514.83 | $489.55 |
| Total interest | $4,889.89 | $1,373.21 |
| Total paid | $30,889.89 | $29,373.21 |
Total paid is the sum of the monthly payments at a fixed rate. The $4,000.00 down payment is the same in both options and is not in the totals. The monthly payment is rounded to cents and the last payment takes up the rounding: $514.92 with the rebate and $489.76 without it. Sales tax, fees and a trade-in are left out, and so is what happens if you sell or refinance before the last payment.
How to use the Cash Back or Low Interest Calculator
- Enter the purchase price of the car and your down payment. Leave the down payment empty to count it as 0.
- Enter the cash rebate. In the rebate option the calculator takes it off the amount you finance.
- Enter the standard APR, the rate you pay if you take the rebate. That can be the dealer's regular rate or a quote from your own bank or credit union.
- Enter the promotional APR you get if you give up the rebate, and the loan term in months. Both loans run over the same term.
- Read the result. It updates as you type, so there is no button to press. The box names the cheaper option and the difference between the two totals. The table lists the amount financed, monthly payment, total interest and total paid for each option.
How the comparison works
Monthly payment = L × r ÷ (1 − (1 + r)^−n) L = amount financed, r = APR ÷ 12, n = months Rebate option: L = price − down payment − rebate, at the standard APR Low rate option: L = price − down payment, at the promotional APR
The monthly payment is rounded to the cent. If that would leave a last payment more than 1% above it, the payment goes up a cent at a time until it does not. Each month the interest is the balance times r, rounded to the cent, and the rest of the payment pays down the balance. The last payment is what is left plus that month's interest, so it takes up the rounding. Total paid adds up all the payments and total interest adds up the monthly interest. At 0% APR the payment is the amount financed divided by the months, and the interest is zero. The option with the lower total paid is the cheaper one.
Worked example
These are example numbers, not a current offer. A car costs $32,000 and you put $4,000 down. The dealer offers a $2,000 rebate with a standard APR of 7%, or a promotional APR of 1.9% without the rebate, both over 60 months. With the rebate you finance $26,000.00, pay $514.83 a month and $30,889.89 in total, of which $4,889.89 is interest. Without the rebate you finance $28,000.00, pay $489.55 a month and $29,373.21 in total, of which $1,373.21 is interest. The promotional rate is cheaper by $1,516.68. These are the calculator's default inputs, so you can check each figure above.
What the comparison leaves out
The calculator compares the two loans and nothing else. Four things can move the answer, and none of them is in the result.
Sales tax
The calculator adds no tax. Whether sales tax applies to the price before or after a manufacturer rebate depends on your state. If you finance the tax, add it to the purchase price.
Fees
Title, registration and dealer fees are not in the result. If you roll them into the loan, add them to the purchase price so both options finance them.
A trade-in
There is no trade-in field. A trade-in lowers what you finance in both options, so add its value to the down payment.
How long you keep the car
The totals assume you make every payment to the end of the term. The rebate lowers what you owe from the first day. The low rate saves a little interest each month. If you sell, trade in or refinance early, you keep the whole rebate but only part of the interest savings, and that favors the rebate.
Frequently asked questions
Is it better to take the cash back or the low interest rate?
It depends on four numbers: the size of the rebate, the gap between the two rates, the amount you borrow and the term. A large rebate on a short loan tends to beat a small rate cut. A long loan on a large balance gives the low rate more months to save interest. Enter your own offer above and compare the two totals.
Does 0% APR always beat a cash rebate?
No. At 0% you pay back only the amount financed. The rebate still wins when it is larger than the interest you would pay on the smaller loan at the standard APR. Enter 0 as the promotional APR to check your offer.
Which standard APR should I enter?
Enter the rate you would pay if you take the rebate. Ask the dealer for it, and get a quote from your own bank or credit union as well. If the rebate is not tied to the dealer's lender, you can take it and finance elsewhere, so enter the lower of the two rates.
Does the down payment change which option wins?
It can. A larger down payment shrinks both loans by the same amount. A smaller loan leaves the low rate less interest to save, while the rebate stays the same size. The down payment is identical in both options, so the calculator leaves it out of the totals.
What does the calculator not include?
Sales tax, title and registration fees, a trade-in, and what happens if you sell or refinance before the term ends. The section above covers each one.