How to Decide Between Cash Back and Low Interest
Car dealers often offer two mutually exclusive promotions: a cash rebate (cash back) or a very low interest rate. This calculator helps you determine which one actually saves you more money.
Key Factors
- Loan Term: Longer loans favor the low interest rate offer because you pay interest for more time.
- Interest Rate Difference: The bigger the gap between the "high" rate (with cash back) and the low rate, the more valuable the low interest offer becomes.
- Cash Back Amount: Larger rebates make the cash back offer more attractive, especially if you plan to pay off the loan quickly.
- Down Payment: A larger down payment reduces the loan amount, which can change which offer is better.
How This Calculator Works
Cash Back Option:
Loan Amount = Auto Price − Cash Back − Down Payment
Uses the higher interest rate to calculate monthly payment and total interest.
Low Interest Option:
Loan Amount = Auto Price − Down Payment
Uses the low promotional interest rate.
We then compare the **Total Cost** of both options and tell you which one saves more money.
Pro Tips
- Always negotiate the price of the car first before discussing financing offers.
- Compare the dealer’s low interest rate with rates from banks and credit unions.
- If you plan to pay off the loan early, cash back is often better.
- If you plan to keep the loan for the full term, low interest is usually better.