Rebate or low APR?
Manufacturers often offer cash back or a low promotional rate, not both. Run the numbers before you choose.
New-car incentives often come as a choice: take cash off the price, or take a low promotional interest rate. Usually you can't have both. Which is better depends on the numbers, not on which one sounds bigger.
The fair way to compare is two full loans over the same term:
- Rebate: the price minus the rebate, financed at your own pre-approval rate
- Low APR: the full price, financed at the promotional rate
Whichever costs less in total wins.
Here's a hypothetical. A $32,000 car over 60 months, with a choice of a $3,000 rebate or a 2.9% promotional rate, and a 6% pre-approval:
- Rebate: $29,000 at 6% is about $561 a month, about $33,639 in total
- Low APR: $32,000 at 2.9% is about $574 a month, about $34,415 in total
Here the rebate wins by about $776. Change the inputs and the answer can flip. A smaller rebate, a lower promotional rate or a higher pre-approval rate all push toward the low APR. That's why the calculator runs both loans with your numbers instead of offering a rule of thumb.
A few things to check. Promotional rates may require strong credit or a shorter term, so confirm you'd qualify. In some states, sales tax is charged on the price before the rebate, which trims its value a little. And either way, take the incentive after you've settled the price, not instead of settling it.