Cash Back or Low Interest Calculator
- Updated
- Formula shown
- Free, no sign-up
Results
Take the low APR: it costs $782 less over 60 months ($615.36 vs $602.33 a month).
- Cash back at 6.5%
- $39,921
- Low APR at 1.9%
- $39,140
| Rate with rebate | Cash-back payment | Low-APR payment | Better deal | Saving |
|---|---|---|---|---|
| 3% | $565.12 | $602.33 | Cash back | $2,233 |
| 4% | $579.20 | $602.33 | Cash back | $1,388 |
| 5% | $593.50 | $602.33 | Cash back | $530 |
| 6% | $608.02 | $602.33 | Low APR | $341 |
| 7% | $622.75 | $602.33 | Low APR | $1,225 |
| 8% | $637.69 | $602.33 | Low APR | $2,122 |
| 9% | $652.85 | $602.33 | Low APR | $3,031 |
| 10% | $668.22 | $602.33 | Low APR | $3,954 |
Make sure the rate with the rebate is one you have actually been offered. Promotional APRs usually need strong credit and may only apply to certain terms. Rebate tax rules vary by state.
How to use the cash back or low interest calculator
- Enter the vehicle price you agreed, the rebate on offer and the promotional APR the dealer offers instead.
- Enter the loan rate you would pay if you take the rebate. Use a real pre-approval from a bank or credit union, not a guess.
- Add your down payment, any trade-in value and the loan term.
- Enter your sales tax rate and choose how your state treats the rebate and trade-in, and whether tax and fees go into the loan.
How the comparison works
Financed (low APR) = price − down − trade-in + tax + fees
Payment = P × r ÷ (1 − (1 + r)−n)
Total cost = down + trade-in + up-front tax and fees + payment × n
Each offer is turned into a loan: P is the amount financed, r the APR ÷ 12 and n the number of months. The rebate lowers what you borrow but at your normal rate; the promotional APR keeps the full price but charges less interest. Because both loans have the same term and timing, the one with the lower total cost is the better deal. The break-even rebate is the rebate that would make the two offers cost exactly the same.
Worked example
A $35,000 car comes with either $3,000 cash back or 1.9% APR for 60 months. You put $3,000 down, pay 7% sales tax on the price before the rebate ($2,450) and roll it into the loan. Your credit union offers 6.5%.
With the rebate you borrow $31,450 at 6.5%: $615.36 a month and $5,471 of interest. With the low APR you borrow $34,450 at 1.9%: $602.33 a month and only $1,690 of interest. The low APR costs $39,140 in all against $39,921, so it saves $782. The rebate would need to be about $3,666 to come out ahead.
If your state didn't tax the rebate, the rebate offer would save $210 of tax and the low APR's advantage would shrink to $535.
Results by loan term
The example offers ($3,000 rebate at 6.5% vs 1.9% APR) over different terms. The longer the loan, the more a low rate is worth.
| Term | Cash-back payment | Low-APR payment | Better deal | Saving | Break-even rebate |
|---|---|---|---|---|---|
| 36 months | $963.91 | $985.23 | Cash back | $768 | $2,304 |
| 48 months | $745.84 | $745.89 | Cash back | $2.84 | $2,998 |
| 60 months | $615.36 | $602.33 | Low APR | $782 | $3,666 |
| 72 months | $528.67 | $506.64 | Low APR | $1,586 | $4,311 |
In practice, promotional rates are often offered only on some terms, so check which term the low APR actually applies to.
Tips for choosing
- Get pre-approved first. The comparison is only as good as the rate you enter for the rebate option.
- Short loans favour the rebate. With less time for interest to build up, a lower price usually beats a lower rate. Long loans favour the low APR.
- Paying cash? Then take the rebate: with no loan, the APR doesn't matter. The same goes if you plan to pay the loan off early.
- Negotiate the price before mentioning the offer. The rebate or APR should come on top of a good price, not replace it.
- Watch the add-ons. Extended warranties and other extras rolled into the loan raise the cost of both offers.
For a single loan in detail, use the auto loan calculator. Considering a lease instead? Try the auto lease calculator.
Frequently asked questions
Is it better to take cash back or low APR financing?
It depends on the rebate, both rates and the term. On a $35,000 car with $3,000 down, 7% tax and 60 months, 1.9% APR costs $39,140 in total against $39,921 for $3,000 cash back at 6.5%, so the low APR saves about $782.
What is a break-even rebate?
The rebate at which both offers cost the same. In the example it is about $3,666: any rebate larger than that would beat the 1.9% APR. On a 36-month loan, the break-even falls to about $2,304, so the $3,000 rebate wins.
Does the loan term change which offer is better?
Yes. Interest builds up over time, so a low rate is worth more on a long loan. In the example, the rebate wins at 36 months by about $768, the two are nearly equal at 48 months, and the low APR wins at 60 and 72 months.
Is sales tax charged before or after a rebate?
It depends on the state. Many states tax the price before a manufacturer rebate, so the rebate does not reduce the tax. If your state taxes the price after the rebate, the rebate offer saves some tax too: $210 at 7% on a $3,000 rebate.
Should I take the rebate if I pay cash?
Yes. With no loan, the interest rate does not matter, so the rebate is pure savings. The same logic applies if you will pay the loan off early or refinance soon.