Vehicle EconomicsDealer Rebate vs Low APR Financing
Dealers frame this as a simple either/or, but the right answer depends on your loan term and how long you'll keep the car. Run both offers through the same math.
Why this comes up
Dealers routinely offer a choice between a cash rebate applied to the price or a subsidized low APR rate, and the two are mutually exclusive, you can't have both. The rebate lowers what you finance; the low rate lowers what that financing costs. Which one actually saves more money depends on the numbers, not on which one sounds better.
How we calculated this
We build two loans on the same net deal (price minus down payment minus trade), one with the rebate subtracted before financing at the rebate offer's APR and term, one at the full price at the low-APR offer's rate and term. Whichever total paid (principal plus interest) is lower wins. We also solve the rebate amount that would exactly tie the two offers.
Worked example, using this page's own defaults ($30,000 deal, $2,000 rebate at 6% APR versus 0.9% APR with no rebate, both 60 months): the low APR offer usually wins at a modest rebate size, run the calculator above to check your own offers.
What this means
- The better offer can change if the low-APR path requires a different (often shorter) term than the rebate path, always compare the actual terms offered, not just the headline numbers.
- A rebate is real cash off the price; a low APR only pays off over the life of the loan, if you plan to pay off early or sell soon, the rebate's value is more certain.
- If you're also weighing paying cash entirely, see Cash vs Finance a Car for that separate comparison.
Limitations
Offer eligibility and tax treatment must be confirmed with the dealer, this does not infer either. See Methodology.
Methodology
This engine combines Vehicle Economics' fixed-rate amortization model (the standard loan-payment formula run out as a full month-by-month schedule) and break-even search model (a closed-form solve where one exists, otherwise a bounded search over a stated plausible range). See Methodology for the full detail.