Cash back vs. low APR calculator
Dealers often offer either a cash rebate or a low promotional rate, not both. Put the two offers side by side and see which one has the lower total cost with your numbers.
The car and the two offers
Same price, down payment and term for both options.
Rebate vs. low APR results
Put the two offers side by side
Enter the car, then the numbers from each offer.
- Price, down payment and term
- Option A: the rebate and your lender's rate
- Option B: the promotional rate
These numbers can't be compared
Difference in total cost Example
Inputs changed — recalculate
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Break-even rate for option A
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Total cost = down payment + every monthly payment. Taxes, fees and add-ons are left out because they are usually the same under both offers — if they aren't, add them to the price you compare. Promotional rates often depend on credit approval and may only be offered on certain terms; check the terms of each offer.
How this is calculated
Option A takes the rebate off the price, so you finance price − down payment − rebate at your lender's rate. Option B finances price − down payment at the promotional rate. Both use the same term and the standard loan payment formula:
payment = P × r ÷ (1 − (1 + r)^−n) The break-even rate is the rate on option A at which both total costs are equal. Since the down payment and term are the same, that happens when both monthly payments match; the calculator finds it by bisection.
A comparison of two sets of numbers, not a recommendation. Assumes fixed rates, equal monthly payments and no early payoff. The rebate is assumed to be applied to the price, lowering the amount financed under option A.
How the comparison works
Option A takes the cash rebate off the price and finances the rest with a loan from your own bank or credit union. Option B skips the rebate and finances the full amount at the dealer's promotional rate.
Both use the same price, down payment and term, so the only question is whether the rebate is worth more than the extra interest your lender's rate generates. The calculator adds up the down payment and every monthly payment for each option and shows the difference.
Worked example: $3,000 cash back or 0 % APR
A $35,000 car with $5,000 down over 60 months.
| A: $3,000 rebate at 6 % | B: 0 % APR | |
|---|---|---|
| Amount financed | $27,000.00 | $30,000.00 |
| Monthly payment | $521.99 | $500.00 |
| Total interest | $4,319.14 | $0.00 |
| Total cost | $36,319.14 | $35,000.00 |
With these numbers, the promotional APR (option B) has the lower total cost, by $1,319.14. The break-even rate is 4.23 %: a lender rate below that would make option A cost less.
If the promotional rate were 0.9 % instead of 0 %, option B would cost $35,691.31, the promotional APR (option B) would have the lower total cost by $627.83, and the break-even rate would be 5.16 %.
Break-even rates against a 0 % offer
The lender rate at which the rebate and a 0 % APR cost the same, for $30,000 financed before the rebate. If your lender's rate is below the figure, the rebate option has the lower total cost.
| Rebate | 36 months | 48 months | 60 months | 72 months |
|---|---|---|---|---|
| $1,000 | 2.21 % | 1.67 % | 1.34 % | 1.12 % |
| $2,000 | 4.53 % | 3.42 % | 2.75 % | 2.30 % |
| $3,000 | 6.97 % | 5.26 % | 4.23 % | 3.53 % |
| $4,000 | 9.54 % | 7.20 % | 5.78 % | 4.83 % |
| $5,000 | 12.25 % | 9.24 % | 7.42 % | 6.20 % |
Assumptions and limits
- Both options use the same price, down payment and term.
- The rebate is applied to the price, lowering the amount financed under option A.
- Fixed rates, equal monthly payments, interest at the annual rate ÷ 12, no early payoff.
- Taxes, fees and add-ons are left out; if they differ between the offers, add them to the price you compare.
- Promotional rates usually depend on credit approval and may be limited to certain terms or models. Check the terms of each offer.
Frequently asked questions
Is it better to take the cash back or the low APR?
It depends on the rebate, the rate your own lender offers, the promotional rate and the term. With a $35,000 car, $5,000 down and 60 months, a $3,000 rebate financed at 6 % costs $36,319.14 in total, while 0 % APR with no rebate costs $35,000.00. With those numbers the promotional APR (option B) has the lower total cost, by $1,319.14. Change any input and the answer can change, which is what the calculator is for.
What is the break-even rate?
It is the rate on the rebate option at which both offers cost the same in total. In the example on this page it is 4.23 %: if your lender's rate is below that, the rebate option costs less; above it, the promotional APR costs less.
If 0% APR means no interest, how can it cost more than taking the rebate?
At 0 % there is no interest, so the total of payments equals the amount financed. What you give up is the rebate: in the example, option B finances $30,000.00 with no interest, while option A finances $27,000.00 and pays $4,319.14 in interest. The comparison is the rebate against that interest.
Can I get both the rebate and the promotional rate?
That depends on the offer: its terms say whether the rebate and the promotional rate can be combined. Check them or ask the dealer. If both apply, enter the rebate under option A with the promotional rate as your lender's rate.
Does a longer term change which option costs less?
It can. The longer the term, the more interest a rate generates, so the break-even rate falls as the term grows. On $30,000 with a $3,000 rebate against 0 %, the break-even rate is 6.97 % at 36 months and 3.53 % at 72 months.