Cash Back vs Low Interest Calculator
Compare taking a car maker’s cash back and financing elsewhere with taking its low promotional rate instead.
Result
Difference in total cost: $1,005.82
Same term both ways; no sales tax, trade-in or dealer fees. Whether tax applies before or after the cash back depends on your state.
- Costs less
- The promotional rate
- Monthly payment taking the cash back
- $528.29
- Monthly payment at the promotional rate
- $511.52
- Total cost taking the cash back
- $36,697.13
- Total cost at the promotional rate
- $35,691.31
- Outside rate at which the two cost the same
- 5.1612%
- Below this rate the cash back costs less; above it the promotional rate does.
https://calcgallery.com/vehicle-ownership/cash-back-vs-low-interest-calculator/
Results are arithmetic on the figures you enter. The site stores no vehicle data, fuel prices, mileage rates, depreciation rates or residual values, because they vary by model and place and change over time. Real fuel economy varies with driving, weather and load. Nothing here is a fitment, safety or financial recommendation. Read the full disclaimer
How to use the Cash Back vs Low Interest Calculator
- Enter the vehicle price, the cash back offered, your down payment and the loan term.
- Enter the promotional rate that comes instead of the cash back, and the rate you can get from your own bank or credit union.
- Read which choice costs less in total, by how much, and the outside rate at which they would cost the same.
How the two choices are costed
cash back: loan = price − cash back − down payment, at your own ratepromotional rate: loan = price − down payment, at the promotional ratetotal cost = down payment + every monthly paymentEach loan is priced with the same schedule as the auto loan calculator: a level payment rounded to the cent, with each month’s interest charged to the cent.
The break-even rate
The break-even rate is the rate at which a loan for the price less the cash back would have exactly the promotional payment. If your own rate is below it, the cash back costs less. If it is above, the promotional rate does. It does not depend on the rate you entered for elsewhere, so you can read it before you shop for a loan.
What is not included
Sales tax, a trade-in, dealer fees and add-ons, and the value of keeping cash in the bank rather than paying it down. The comparison is of money paid, not of what that money might have earned.
With your numbers
- Cash back: $5,000.00 down + $31,697.13 of payments = $36,697.13
- Promotional rate: $5,000.00 down + $30,691.31 of payments = $35,691.31
- Difference = $1,005.82
Quick reference
Same term both ways; no sales tax, trade-in or dealer fees. Whether tax applies before or after the cash back depends on your state.
| Example | Difference in total cost |
|---|---|
| 35,000, 3,000 back or 0.9%, against 6.5% | $1,005.82 |
| The same against 3.5% elsewhere | $1,220.69 |
| 30,000, 2,500 back or 0% over 48 months | $1,609.11 |
| 45,000, 4,000 back or 1.9% over 72 months | $198.81 |
| 25,000, 1,000 back or 2.9% over 36 months | $127.62 |
| 40,000, 2,000 back or 0% over 60 months | €1,703.69 |
Common questions about the Cash Back vs Low Interest Calculator
- Why can I not have both the cash back and the low rate?
- Car makers usually offer them as alternatives: take the cash off the price, or keep the full price and finance it at their low rate. Taking the cash back means financing elsewhere at an ordinary rate. The page prices both on the same term.
- When is the cash back the better deal?
- When the rate you can get elsewhere is low enough. On 35,000 with 3,000 back, 5,000 down and 60 months, a 0.9% offer costs less unless your own rate is below about 5.16%. The break-even rate shows that line for your numbers.
- Does a longer term change the answer?
- Yes. The promotional rate saves interest every month, so over a longer term its advantage grows, while the cash back stays the same. Promotional rates are often offered only on some terms, so compare the terms you are actually offered.
- What about sales tax?
- It is left out, because states treat it differently. If the tax is financed with the car, enter the price with the tax included. Where tax is charged on the price before the cash back, that is all, because both choices pay the same tax. Where it is charged on the price after the cash back, the cash-back choice pays less tax, by your tax rate times the cash back, so add that to the cash back as well: with 7% tax and 3,000 back, enter 3,210. If you pay the tax in cash instead, leave it out; where it is charged after the cash back, the cash-back choice then costs that much less than shown.