One Offer, Never Both
Manufacturers fund two competing incentives: a cash rebate that reduces the price, or a subsidised finance rate through the captive lender. You may take one. Which is better depends entirely on the size of the loan, its length, and the rate you would otherwise qualify for.
How to Decide
Compare the total amount paid under each option, not the monthly payment. The rebate lowers the balance you finance; the low rate lowers the interest on a larger balance. On $38,000 with $5,000 down over 60 months:
| A: $3,000 cash back at 7.5% | B: 1.9% financing | |
|---|---|---|
| Amount financed | $30,000 | $33,000 |
| Monthly payment | $601.14 | $576.97 |
| Total interest | $6,068 | $1,618 |
| Total paid | $36,068 | $34,618 |
Here the low rate wins by $1,450 — and it also has the lower monthly payment, which is unusual. The rebate would need to be about $4,200 to break even against the 1.9% offer.
What Shifts the Answer
- A shorter term favours the rebate. Less time means less interest, so the value of a low rate shrinks while the rebate keeps its full value.
- A large down payment favours the rebate, for the same reason.
- Poor credit favours the rebate — promotional rates typically require a 700+ score, and the advertised rate may simply be unavailable to you.
- A long term favours the low rate, because interest accumulates over more months.
The Catch Worth Checking
Promotional financing usually comes from the manufacturer's own lender and is restricted to specific models, trims and terms — often only 36 or 48 months, which raises the payment substantially. A 1.9% offer at 36 months may be worse in cash-flow terms than a rebate financed over 60 months at a credit union.
Get a pre-approval from a bank or credit union before visiting the dealer. It gives you the true alternative rate, which is the number this entire comparison depends on.
Frequently Asked Questions
Can I take the rebate and finance elsewhere?
Yes, and this is often the best combination: take the cash rebate, then finance through your own credit union at a market rate. The rebate is a price reduction, not a financing condition.
Does the rebate reduce sales tax?
In most states, yes — tax is charged on the price after the manufacturer rebate. A handful tax the pre-rebate price. This can be worth a few hundred dollars in the rebate's favour.
Is 0% financing really free?
The financing is, but you are giving up the rebate to get it. The forgone rebate is the true cost of that 0%, and this calculator measures exactly that.