Answer first
What this calculator tells you
Compare taking a cash-back rebate with your own loan against the dealer's low promotional rate. Decide between the rebate and the low rate by comparing the total cost of each, not the headline offers. Formula: Payment = P × r ÷ (1 − (1 + r)⁻ⁿ), once with the cash back taken off the price at your own rate, once with the full price at the dealer's low rate; compare total cost. At the worked-example inputs, the advantage of taking the cash back is -$1,437. Holding every other input steady, moving vehicle price from $28,000 to $42,000 moves the result from -$2,312 to -$563.
Transparent method
The formula
Decide between the rebate and the low rate by comparing the total cost of each, not the headline offers.
Worked example
Example inputs
How to interpret the result
A dealer who offers either a rebate or a low rate is giving you one discount in two forms, and the cheaper form depends on your own loan rate. On a $35,000 car over five years, a $2,500 rebate with a 6.5 percent loan costs about $38,150 in payments. The 1.9 percent dealer rate on the full price costs about $36,700. Here the low rate wins by roughly $1,440, even though the rebate looks like cash in hand.
At the worked-example inputs the advantage of taking the cash back is -$1,437. It rises with cash-back rebate and dealer's low promotional rate and falls as your own loan rate (with cash back), loan term and vehicle price increase.
Confirm taxes, insurance, fees, incentives and contract terms.
Before you rely on it
What to check
Get a real loan quote from your own bank or credit union before you decide. The rate you would actually pay is the number that flips the answer.
The common error
Where people go wrong with cash back vs low interest calculator
Comparing the rebate with the interest saved and ignoring the fact that the rebate also shrinks the loan. Both effects run through the payment, so compare the two total costs side by side.
Sensitivity evidence
How vehicle price changes the advantage of taking the cash back
Holding every other input at the worked-example value, moving vehicle price from $28,000 to $42,000 moves the advantage of taking the cash back from -$2,312 to -$563: a spread of $1,749, or 122% of the worked-example result.
| Vehicle price | Advantage of taking the cash back | Monthly payment with cash back | Monthly payment at the low rate |
|---|---|---|---|
| $28,000 | -$563 | $499 | $490 |
| $31,500 | -$1,000 | $567 | $551 |
| $35,000worked example | -$1,437 | $636 | $612 |
| $38,500 | -$1,875 | $704 | $673 |
| $42,000 | -$2,312 | $773 | $734 |
Every input, tested
Which input moves the advantage of taking the cash back most
Of the 5 inputs, your own loan rate (with cash back) moves the advantage of taking the cash back most ($1,827 across the range tested) and dealer's low promotional rate moves it least ($459).
| Input | Tested from | To | Advantage of taking the cash back at each end | Swing |
|---|---|---|---|---|
| Your own loan rate (with cash back) | 5.5% | 7.5% | -$531 to -$2,358 | $1,827 (127%) |
| Loan term | 4.0 years | 6.0 years | -$621 to -$2,275 | $1,654 (115%) |
| Vehicle price | $31,500 | $38,500 | -$1,000 to -$1,875 | $874 (61%) |
| Cash-back rebate | $2,250 | $2,750 | -$1,731 to -$1,144 | $587 (41%) |
| Dealer's low promotional rate | 1.6% | 2.1% | -$1,666 to -$1,208 | $459 (32%) |
Two variables at once
Advantage of taking the cash back by vehicle price and cash-back rebate
Across the grid the advantage of taking the cash back runs from -$2,899 to $24. Moving vehicle price from $28,000 to $42,000 shifts it by $1,749 at the middle column, and moving cash-back rebate from $2,000 to $3,000 shifts it by $1,174 at the middle row, so vehicle price is the bigger lever here.
| Vehicle price \ Cash-back rebate | $2,000 | $2,500 | $3,000 |
|---|---|---|---|
| $28,000 | -$1,150 | -$563 | $24 |
| $31,500 | -$1,587 | -$1,000 | -$413 |
| $35,000 | -$2,024 | -$1,437 | -$851 |
| $38,500 | -$2,462 | -$1,875 | -$1,288 |
| $42,000 | -$2,899 | -$2,312 | -$1,725 |
The highlighted cell is the worked example: -$1,437.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Vehicle price | $35,000 | Enter the vehicle price used in this calculation. |
| Cash-back rebate | $2,500 | Enter the cash-back rebate used in this calculation. |
| Loan term | 5.0 years | Enter the loan term used in this calculation. |
| Your own loan rate (with cash back) | 6.5% | The rate a bank or credit union offers you if you take the rebate. |
| Dealer's low promotional rate | 1.9% | The rate the dealer offers if you give up the rebate. |
| Advantage of taking the cash back | -$1,437 | |
| Monthly payment with cash back | $636 | |
| Monthly payment at the low rate | $612 | |
Inputs, definitions and assumptions
Vehicle price
Enter the vehicle price used in this calculation. The prefilled worked-example value is $35,000.
Cash-back rebate
Enter the cash-back rebate used in this calculation. The prefilled worked-example value is $2,500.
Loan term
Enter the loan term used in this calculation. The prefilled worked-example value is 5.0 years.
Your own loan rate (with cash back)
The rate a bank or credit union offers you if you take the rebate. The prefilled worked-example value is 6.5%.
Dealer's low promotional rate
The rate the dealer offers if you give up the rebate. The prefilled worked-example value is 1.9%.
How to use this calculator
- 1Verify the inputs. Gather vehicle price, cash-back rebate, loan term, your own loan rate (with cash back) and dealer's low promotional rate from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the advantage of taking the cash back at -$1,437. Store your own version of it as Scenario A.
- 3Test one change. Start with your own loan rate (with cash back), the input with the biggest effect here: moving your own loan rate (with cash back) from 5.5% to 7.5% takes the advantage of taking the cash back from -$531 to -$2,358, a swing of 127% of the worked-example figure.
- 4Check the boundary. Read the interpretation boundary above before acting on the result.
People also ask
Frequently asked questions
How do you calculate cash back vs low interest?
Payment = P × r ÷ (1 − (1 + r)⁻ⁿ), once with the cash back taken off the price at your own rate, once with the full price at the dealer's low rate; compare total cost. Enter vehicle price in dollars, cash-back rebate in dollars, loan term in years, your own loan rate (with cash back) in percent and dealer's low promotional rate in percent (6.5 means 6.5%). At the worked-example inputs the advantage of taking the cash back is -$1,437.
What does the cash back vs low interest result mean?
Decide between the rebate and the low rate by comparing the total cost of each, not the headline offers. At the worked-example inputs the advantage of taking the cash back is -$1,437. It rises with cash-back rebate and dealer's low promotional rate and falls as your own loan rate (with cash back), loan term and vehicle price increase.
How much does vehicle price change the advantage of taking the cash back?
Holding every other input at the worked-example value, moving vehicle price from $28,000 to $42,000 moves the advantage of taking the cash back from -$2,312 to -$563, a spread of $1,749.
What are the limits of this cash back vs low interest calculator?
Confirm taxes, insurance, fees, incentives and contract terms. The tables on this page test vehicle price only from $28,000 to $42,000; a value outside that range is not tabulated here.
Which input moves the advantage of taking the cash back most in the cash back vs low interest calculator?
Ranked by how far each moves the advantage of taking the cash back across the range tested: your own loan rate (with cash back) ($1,827, 127%), loan term ($1,654, 115%), vehicle price ($874, 61%) and cash-back rebate ($587, 41%).
How much does cash-back rebate matter in the cash back vs low interest calculator?
The worked example uses $2,500. Holding every other input at its worked-example value, moving cash-back rebate from $2,250 to $2,750 takes the advantage of taking the cash back from -$1,731 to -$1,144, a swing of 41% of the worked-example figure.
How much does loan term matter in the cash back vs low interest calculator?
The worked example uses 5.0 years. Holding every other input at its worked-example value, moving loan term from 4.0 years to 6.0 years takes the advantage of taking the cash back from -$621 to -$2,275, a swing of 115% of the worked-example figure.
How much does your own loan rate (with cash back) matter in the cash back vs low interest calculator?
The worked example uses 6.5%. Holding every other input at its worked-example value, moving your own loan rate (with cash back) from 5.5% to 7.5% takes the advantage of taking the cash back from -$531 to -$2,358, a swing of 127% of the worked-example figure.
How much does dealer's low promotional rate matter in the cash back vs low interest calculator?
The worked example uses 1.9%. With the other inputs left at the worked example, moving dealer's low promotional rate from 1.6% to 2.1% takes the advantage of taking the cash back from -$1,666 to -$1,208, a swing of 32% of the worked-example figure.
Which inputs change the monthly payment with cash back in the cash back vs low interest calculator?
At the worked-example inputs it is $636. Vehicle price takes it from $567 to $704, cash-back rebate takes it from $641 to $631, loan term takes it from $771 to $546 and your own loan rate (with cash back) takes it from $621 to $651.
Which inputs change the monthly payment at the low rate in the cash back vs low interest calculator?
At the worked-example inputs it is $612. Vehicle price takes it from $551 to $673, loan term takes it from $758 to $515 and dealer's low promotional rate takes it from $608 to $616.
How much car can I afford?
Judge it on total cost of ownership instead of the payment: financing, insurance, fuel or charging, maintenance, tyres, registration and expected repairs. Two vehicles with similar payments can differ substantially in running cost, and that difference frequently exceeds the payment gap.
Sources and evidence
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