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Auto Rebate vs. Low Interest Financing Calculator
You will often see dealer incentives, particularly late in a model year, that give you the option to do one of the following:
buy a car and get cash back in the form of a rebate
get low interest financing, typically for the duration of your auto loan
So the question becomes: which is the better value, a cash back rebate or low-interest auto financing? You can find your answer right here. Use this calculator to determine whether to choose low-interest financing or a manufacturer rebate.
A rebate will reduce the total purchase price of the car, but low-interest financing will reduce the amount of interest you pay over the years. Each will lower your monthly payment - but by how much?
Try this auto financing calculator to find out.
Auto Rebate vs Low Interest Financing Calculator Definitions
- Total purchase price (before tax) - This is the total cost of your auto purchase. Include the cost of the vehicle, any additional options and any destination charges. Don't include sales tax in this amount. Sales tax will be calculated for you and included in your total "after tax" price.
- Term in months - Number of months for your auto loan.
- Cash down - Total amount of cash used in this purchase. The larger your cash down payment the smaller the auto loan you will need for financing this purchase.
- Trade allowance - The total amount that you are given for any automobile that you trade-in as part of this purchase. In some states a trade-in can also reduce the amount of sales tax you will owe. See the definition for "Sales tax deduction for trade-in" below for more information on trade-in vehicles and sales tax.
- Amount owed on trade - Total loan balance still outstanding on the trade-in. Hopefully you aren't "upside down," which means you owe more on the trade-in than the value of the vehicle. This can happen when you are trading in a nearly new car.
- Sales tax rate - Sales tax percentage rate charged on this purchase.
- Low-interest financing - The incentive interest rate you may be able to receive from an auto manufacturer. These rates are usually significantly below standard auto loan interest rates. Low-interest auto loan financing can be as little as 0% per year. Most manufacturers allow you to choose either low interest financing or a manufacturer rebate, but not both. This rebate vs low interest auto financing loan calculator assumes that if you choose low interest financing you are not eligible for any manufacturer rebate.
- Manufacturer rebate - A cash rebate paid by the auto manufacturer to you when you purchase a new vehicle. Most manufacturers allow you to choose either low interest financing or a manufacturer rebate, but not both.
- Traditional financing - The interest rate you may be able to receive from an bank, credit union or other lender. This is usually a higher interest rate than the manufacturer's low interest auto financing, but is often very competitive when used in combination with a manufacturer rebate. This calculator assumes that if you choose a manufacturer rebate you are not eligible for manufacturer low interest auto financing.
- No sales tax deduction for trade-in - If you live in a state where your sales tax is calculated on your full purchase price check this box. If this box is unchecked sales tax is calculated on the purchase price less trade-in. Currently California, the District of Columbia, Hawaii, Maryland and Michigan allow no deductions for trade-ins when calculating sales tax. In addition, Alaska, Delaware, Montana, New Hampshire, and Oregon have no sales tax on autos.
- Calculate sales tax before rebate - Some states will calculate sales tax on your purchase price before a manufacturer's rebate is applied. If your state calculates sales tax on the vehicle price before the rebate is applied, check this box.
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