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Cash Back or Low Interest Calculator

Compare a cash rebate vs. a lower interest offer to see which saves you more over the life of your loan.

Option 1: Cash Back Offer
Option 2: Low Interest Rate Offer
Loan Details
With Cash Back
Total Loan Amount
Monthly Payment
Total Interest
Total Cost
With Low Interest
Total Loan Amount
Monthly Payment
Total Interest
Total Cost
How to Use

1. Enter the vehicle price, available cash rebate, and both high and low interest rates.
2. Include your down payment, trade-in value, sales tax rate, and any fees.
3. Choose whether to include fees in the loan balance or pay them upfront.
4. Click Calculate to compare which offer gives you the lower total cost.
5. Review the detailed breakdown under each option.

Cash Back vs. Low Interest: Which Car Deal is Better?

Buying a new car is a significant financial decision. Beyond negotiating the price of the vehicle, you are often faced with a tricky choice in the finance office: Should you take the cash rebate (Cash Back) or the special low interest financing (often 0% to 1.9% APR)?

Car manufacturers use these incentives to move inventory, but they rarely allow you to combine both. You must choose one. This Cash Back vs. Low Interest Calculator helps you do the math instantly to see which option keeps more money in your pocket.

Understanding the Two Options

1. Cash Back Rebate: This is an immediate discount applied to the price of the car. It lowers the principal amount you need to borrow. However, you will usually have to accept a standard (higher) interest rate from the lender.

2. Low Interest Financing: The dealer offers a subsidized interest rate, sometimes as low as 0% APR. You pay full price for the car (no rebate), but your monthly finance charges are significantly lower.

When Should You Choose Cash Back?

While every deal is different, the cash back rebate is often the better financial choice in the following scenarios:

  • You plan to pay off the loan early: If you intend to pay off the car in 1 or 2 years, the high interest rate won't hurt you as much, so the upfront discount is more valuable.
  • You have a high trade-in or down payment: If you are borrowing a small amount, the interest rate matters less. The cash rebate reduces the total cost immediately.
  • You plan to refinance: Some savvy buyers take the rebate to lower the price, then refinance the loan with a credit union a few months later to get a better interest rate.
  • The vehicle is less expensive: On cheaper cars, the interest savings from a low rate might be smaller than a flat $2,000 or $3,000 rebate.

When Should You Choose Low Interest?

Promotional financing rates (like 0.9% or 1.9% APR) are powerful for long-term savings. You should consider this option if:

  • You want the lowest monthly payment: Low interest rates drastically reduce the monthly payment, improving your monthly cash flow.
  • You are taking a long-term loan: If you are financing for 60, 72, or 84 months, interest accumulates quickly. A low APR prevents you from paying thousands in extra interest over the years.
  • You are borrowing a large amount: On expensive trucks or SUVs, the interest on a standard loan can be massive. Eliminating that interest often outweighs a small cash rebate.

Calculation Example

Let's look at a mathematical example. Assume you are buying a $30,000 car with a 60-month term.

  • Option A (Cash Back): You get a $2,000 rebate, making the loan $28,000. The standard bank rate is 6%. Over 5 years, you will pay roughly $4,400 in interest. Total cost: ~$32,400.
  • Option B (Low Interest): You pay the full $30,000, but get 0.9% financing. Over 5 years, you pay only roughly $700 in interest. Total cost: ~$30,700.

In this example, the Low Interest option saves you about $1,700 more than the cash rebate. However, if the rebate was $4,000, the math would flip in favor of the Cash Back. This is why using a calculator is essential—guessing is expensive!

Frequently Asked Questions (FAQ)

Does my credit score affect these offers?

Yes, significantly. The "Low Interest" or "0% APR" offers are almost always reserved for buyers with excellent credit (typically a FICO score of 720 or higher). If your credit score is average or poor, you may not qualify for the promotional rate, making the Cash Back rebate your default option.

Can I negotiate the car price if I take the Low Interest offer?

You should always negotiate the price of the car before discussing financing. The "price" of the vehicle and the "financing method" are two separate transactions. Don't let a dealer tell you that you can't negotiate the price just because you are getting a special interest rate.

Are there hidden fees in 0% financing?

Generally, no, but dealers may be less willing to discount the vehicle price further if you take the 0% offer because they lose the backend profit they usually make on financing. Always compare the "Out the Door" price for both scenarios.

How do I use this calculator?

Simply enter the Cash Back Amount offered by the dealer and the Standard Interest Rate you would get from a bank. Then, enter the Promotional Low Rate. Fill in the vehicle price, down payment, and loan term. The calculator will instantly display which option results in the lower Total Cost.