Cash Back or Low Interest Calculator
Decide between a manufacturer cash rebate and a subsidised low-interest offer.
Inputs
The dealer's cash-back offer. Applied as additional down payment.
The rate you'd get from your bank or credit union without the dealer deal.
The dealer's special low rate if you forgo the rebate.
Applied to the vehicle price. Note: in some states, tax is calculated on the after-rebate price.
Some states compute sales tax after the rebate, reducing tax slightly. Check your state's rules.
Better Deal
Low-Interest (Subsidised APR) — LOWER TOTAL COST
Total Cost Difference
$3,669.60
How much cheaper the winning option is over the full term.
Cash-Back Monthly Payment
$536.61
Cash-Back Total Cost
$37,197
Cash-Back Total Interest
$5,097
Low-Interest Monthly Payment
$508.79
Low-Interest Total Cost
$33,527
Low-Interest Total Interest
$1,427
Monthly Payment Difference
$27.83
Step by step
Cash-back: loan amount
$32,100 − $5,000 (down + rebate)
= $27,100
Cash-back: monthly payment at 7.00%
= $536.61
Cash-back: total cost
= $37,196.75
Low-interest: loan amount
$32,100 − $3,000 down
= $29,100
Low-interest: monthly payment at 1.90%
= $508.79
Low-interest: total cost
= $33,527.15
Verdict
= Low-Interest (Subsidised APR) — LOWER TOTAL COST
The subsidised rate saves $3,669.60 in total payments compared to taking the rebate.
How it works
Car manufacturers incentivise purchases through two mutually exclusive offers: a cash rebate (applied like an extra down payment) or a below-market interest rate on financing. Taking the rebate reduces your loan amount but leaves you paying the market rate. Taking the low-interest deal means financing a higher amount but at a subsidised rate. Which is better depends on the spread between your market rate and the subsidised rate, and the size of the rebate. Generally: larger rebates favour cash-back; very low subsidised rates (0–1%) often beat the rebate regardless of rebate size.
Formula
Monthly payment (both scenarios)
Payment = Loan amount × monthly rate / (1 − (1 + monthly rate)^−term)
- P
- Loan amount (price − down − rebate for cash-back; price − down for subsidised)
- r
- Monthly rate (APR / 12)
- n
- Term in months
Frequently Asked Questions
When does the cash rebate usually win?
The rebate wins when your market financing rate is close to the dealer's subsidised rate — the rate advantage is small, so the upfront cash reduction matters more. It also wins for very short loan terms where there's less time for the low rate to generate interest savings.
When does the low-interest rate usually win?
The subsidised rate wins when the rate gap is large (e.g., market rate 8% vs dealer 0%) and the loan term is long. More months at a dramatically lower rate accumulates more savings than the one-time rebate.
What if I plan to pay off the loan early?
Early payoff reduces the advantage of a low interest rate (less time to earn savings). If you plan to pay off quickly, the rebate is more attractive. Re-run the calculation with a shorter term to simulate early payoff.
Does tax treatment of the rebate affect the analysis?
In most US states, sales tax is calculated on the full vehicle price regardless of rebate. Some states (Michigan, for example) compute tax on the after-rebate price. Toggle the 'Tax on rebated price' option to reflect your state's rules.