Cash Back or Low Interest Calculator
Decide between a dealer's cash-back rebate and a low promotional interest rate.
About the Cash Back or Low Interest Calculator
Dealers often let you pick either a rebate off the price or cheap financing, not both. Taking the rebate means borrowing less, but at your own lender's rate; taking the low rate means borrowing more, cheaply. Comparing total payments over the same term shows which costs less.
The formula
Compare payment × months for (price − down − rebate) at your rate vs (price − down) at the promo rate
Worked example
Example: Better deal = Take the cash back
- Inputs: Vehicle price: $21,000; Down payment: $3,000; Cash back offer: $1,500; Your bank's rate (with cash back): 4%; Dealer's low rate (no cash back): 1.1%; Term: 3 years.
- Formula: Compare payment × months for (price − down − rebate) at your rate vs (price − down) at the promo rate
- Result: Better deal = Take the cash back
Things to keep in mind
- Sales tax on the rebate differs by state; some charge tax on the pre-rebate price.
Questions people ask
When does cash back usually win?
With a large rebate, a short term or a low rate from your own bank.
Can I pay cash?
Then the rebate always wins, since you aren't financing.