Cash Back or Low Interest Calculator
Decision Tips
- •Longer loan terms often favor low interest rates
- •Large cash back amounts favor the rebate option
- •Consider your credit score impact on available rates
- •Cash back provides immediate benefit; low interest saves over time
Related Calculators
Understanding Dealer Incentives
Cash Back vs Low Interest Financing
When purchasing a vehicle, dealers often offer two types of incentives: a cash back rebate or special low-interest financing. You typically cannot combine both offers, so understanding which option saves you more money is crucial.
Cash Back Rebate
A direct discount applied to the vehicle price. You receive the full rebate immediately, reducing the amount you need to finance. However, you will pay standard interest rates.
Low Interest Financing
Special promotional interest rates, often 0% to 2.9%. No cash back is provided, but the reduced interest over the loan term can result in significant savings.
When Cash Back Usually Wins
- Large cash back amounts relative to the vehicle price
- Shorter loan terms (36 months or less)
- Small difference between standard and promotional rates
- Planning to pay off the loan early
- Need immediate cash flow benefits
When Low Interest Usually Wins
- Longer loan terms (60-72 months)
- Very low promotional rates (0% to 1%)
- Higher vehicle prices
- Large difference between standard and promotional rates
- Planning to keep the loan for the full term
Example Comparison
| Factor | Cash Back + 6.9% | 0% Financing |
|---|---|---|
| Vehicle Price | $30,000 | $30,000 |
| Cash Back | -$3,000 | $0 |
| Amount Financed | $27,000 | $30,000 |
| Total Interest | $4,893 | $0 |
| Total Cost | $31,893 | $30,000 |
Important Considerations
- • Low interest rates often require excellent credit scores
- • Some manufacturers may not allow negotiation on the vehicle price with special financing
- • Consider the opportunity cost of using cash for down payment vs investing
- • Factor in any differences in insurance costs based on financed amount
Frequently Asked Questions
Is it better to take cash back or low interest financing?
It depends on the loan term, cash back amount, and interest rate difference. Generally, low interest financing (especially 0%) wins on longer loans (60-72 months), while cash back often wins on shorter terms (36-48 months) or when the rebate is large relative to the vehicle price. Use our calculator to compare your specific scenario.
Can I negotiate the price and get special financing?
It depends on the manufacturer and dealer. Some promotional financing rates require you to pay the full MSRP with no negotiation, while others allow price negotiation. Cash back rebates typically allow price negotiation. Always ask the dealer explicitly about each option's terms before deciding.
Do I need good credit for 0% financing?
Yes, 0% APR financing typically requires excellent credit (usually 720+ FICO score). If your credit score is lower, you may only qualify for standard rates, making the cash back option more attractive. The dealer can tell you which incentives you qualify for based on a credit check.
How do I calculate which option saves more money?
Compare the total cost of each option: For cash back, subtract the rebate from the vehicle price, then calculate total payments at standard rates. For low interest, calculate total payments on the full price at the promotional rate. The option with the lower total cost saves you money. Our calculator does this math for you.