Cash Back or Low Interest Calculator
Take the manufacturer rebate and finance elsewhere, or take the subsidised 0–2% rate? Compares both over the same term and gives the break-even market rate.
Cash Back or Low Interest Calculator: with the default inputs, the better deal saves is $1,122.90.
Before any rebate, after you've settled on the price.
Both offers must be compared over the same term.
The manufacturer rebate you forfeit if you take the subsidised rate.
Your credit union or bank rate — the rate you'd pay if you take the rebate.
The captive lender's promotional rate, available only if you give up the rebate.
- Which to take
- Take the 1.9% financing — it costs $1,123 less than taking the rebate at 6.9%.
- Payment — rebate + market rate
- $543.24
- Payment — subsidised rate
- $524.52
- Total cost — rebate + market rate
- $37,594Down payment plus every loan payment.
- Total cost — subsidised rate
- $36,471
- Monthly difference
- -$18.72Subsidised payment minus rebate payment.
- Break-even market rate
- 5.44%Below this rate the rebate wins; above it, the subsidised financing does.
- Interest — rebate route
- $5,094
- Interest — subsidised route
- $1,471
Assumptions
- Both offers use the same term, the same down payment and level monthly payments.
- The rebate is applied as a reduction to the amount financed.
- Sales tax, fees and any difference in taxable price between the two routes are excluded.
- Total cost is undiscounted cash out of pocket; a present-value comparison narrows the gap slightly in favour of the longer, cheaper-rate loan.
| Option | Amount financed | Rate | Monthly payment | Interest | Total cost |
|---|---|---|---|---|---|
| Take the rebate | $27,500 | 6.9% | $543.24 | $5,094 | $37,594 |
| Take the low rate | $30,000 | 1.9% | $524.52 | $1,471 | $36,471 |
How this is worked out
The formula
Rebate route: financed = price − down − rebate, payment at your market rate Low-rate route: financed = price − down, payment at the promotional rate Total cost = down payment + payment × months Break-even market rate: the r that makes (price − down − rebate) × r/12 amortized over n months = the promotional payment
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Negotiated price
- Before any rebate, after you've settled on the price.in dollars · 0 or more · defaults to 35000
- Down payment and trade-in
- A number.in dollars · 0 or more · defaults to 5000
- Term
- Both offers must be compared over the same term.from 1 to 96 · whole numbers only · defaults to 60
- Cash back / rebate
- The manufacturer rebate you forfeit if you take the subsidised rate.in dollars · 0 or more · defaults to 2500
- Rate you can get elsewhere
- Your credit union or bank rate — the rate you'd pay if you take the rebate.a percentage · from 0 to 40 · defaults to 6.9
- Subsidised rate offered
- The captive lender's promotional rate, available only if you give up the rebate.a percentage · from 0 to 40 · defaults to 1.9
What you get back
- The better deal savesmain answer
- Which to take
- Payment — rebate + market rate
- Payment — subsidised rate
- Total cost — rebate + market rate
- Down payment plus every loan payment.
- Total cost — subsidised rate
- Monthly difference
- Subsidised payment minus rebate payment.
- Break-even market rate
- Below this rate the rebate wins; above it, the subsidised financing does.
- Interest — rebate route
- Interest — subsidised route
What this assumes
- Both offers use the same term, the same down payment and level monthly payments.
- The rebate is applied as a reduction to the amount financed.
- Sales tax, fees and any difference in taxable price between the two routes are excluded.
- Total cost is undiscounted cash out of pocket; a present-value comparison narrows the gap slightly in favour of the longer, cheaper-rate loan.
About this calculator
Manufacturers offer one incentive or the other, never both: either cash back, or financing below the market rate. The advertised numbers ($2,500 back, or 1.9% APR) are not comparable on their face, and the dealer's finance office has no incentive to make them comparable. Run both to the same finish line — total cash out of pocket over the same term — and one of them wins.
How to use it
Enter the price you've actually negotiated, your down payment plus trade-in, the term, the rebate, the rate your own bank or credit union will give you, and the promotional rate. Get the outside rate quoted before you go in. Without it, the comparison has a hole where its most important input should be, which is precisely the condition under which the finance office prefers to run the numbers.
What decides it
Three things:
- The size of the rebate relative to the amount financed. A $2,500 rebate on a $30,000 loan is a permanent 8% discount on the principal; the low rate has to beat that over the term.
- The gap between the two rates. A 5-point gap over 60 months is worth a lot; a 1-point gap is worth very little.
- The term. Longer terms favour the low rate, because there's more interest for the subsidy to eat. Shorter terms favour the rebate. The same pair of offers can flip when you move from 36 to 72 months.
The break-even market rate collapses all of that into one number: the rate at which the two are identical. If you can borrow below it, take the cash; above it, take the financing. With a $2,500 rebate on a $30,000 balance over 60 months against 1.9% financing, break-even is about 5.44% — so a credit union at 5% means take the cash, and a bank at 7% means take the rate.
Where this gets subtle
- The low rate is not free money. It's a price discount delivered as interest relief, and you only collect it if you keep the loan to term. Pay it off early and you forfeit the rest of the subsidy while having already given up the rebate.
- If you're paying cash, always take the rebate. The subsidised rate is worth nothing to you.
- Comparing on payment alone is a trap. The subsidised offer can have the lower payment and the higher total cost, or vice versa; only total cost settles it.
- Rebates can be structured differently. Applied as a cap-cost reduction (what this models), sent as a cheque, or used as down payment. Some states tax the pre-rebate price, some the post-rebate price, which shifts the answer by a few hundred dollars.
- Promotional rates require top-tier credit. If you don't qualify, the comparison you were shown never applied to you.
Frequently asked questions
▸Is 0% financing always better than cash back?
No. 0% only saves the interest you would otherwise have paid, and over a short term that can be less than the rebate. Compare the total cost, or read the break-even rate: if your own bank beats it, the rebate is worth more.
▸What is the break-even market rate?
The rate at which financing the rebated price costs exactly the same as financing the full price at the promotional rate. Borrow below it and the rebate wins; above it and the subsidised financing does.
▸Can I get both the rebate and the low rate?
Almost never. The captive finance company funds the rate subsidy out of the same incentive budget as the rebate, so the offers are explicitly either/or. Ask anyway — occasionally a regional incentive stacks.
▸What if I plan to pay the loan off early?
That favours the rebate. The rate subsidy is only collected month by month over the full term, so early payoff throws away the part you haven't used, while the rebate is already in hand.
▸Does the rebate change my sales tax?
It depends on the state. Some tax the price before the manufacturer rebate, some after. Where the rebate reduces the taxable price, it is worth a few percent more than shown here.
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