Compare Dealer & Manufacturer Rebates vs 0% & Other Low APR Financing Deals


Which Option is Better?

This calculator will help you to decide whether or not you should take the rebate, or if you should go with the special dealer financing.

Special interest rate:
Regular interest rate (APR %):
Cash rebate amount:
Your savings interest rate:
Car purchase price:
Down payment amount:
Loan term (years):
Your combined state and federal tax rate:
Rebate will be:


Recent Auto Loan Rates

We publish an auto lender review guide to help buyers see current rates from top nationwide lenders.

For your convenience, here is data on what rates looked like across Q2 of 2022.

Borrower Credit Score New Used
Super Prime 781 - 850 2.96% 3.68%
Prime 661 - 780 4.03% 5.53%
Nonprime 601 - 660 6.57% 10.33%
Subprime 501 - 600 9.75% 16.85%
Deep Subprime 300 - 500 12.84% 20.43%

Source: Experian 2022 Q2 data, published in August of 2022

For historical comparison, here is what the data looked like in Q1 of 2020 as the COVID-19 crisis spread across the United States.

Borrower Credit Score New Used
Super Prime 720 or higher 3.65% 4.29%
Prime 660 - 719 4.68% 6.04%
Nonprime 620 - 659 7.65% 11.26%
Subprime 580 - 619 11.92% 17.74%
Deep Subprime 579 or lower 14.39% 20.45%

Source: Experian 2020 Q1 data, published on August 16, 2020

Across the industry, on average automotive dealers make more money selling loans at inflated rates than they make from selling cars. Before you sign a loan agreement with a dealership you should contact a community credit union or bank and see how they compare. You can often save thousands of dollars by getting a quote from a trusted financial institution instead of going with the hard sell financing you will get at an auto dealership.

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Putting Car Rebates in Context

Auto dealers frequently offer customers a rebate or low interest, even zero interest, financing. While both options have their benefits, it isn't necessarily a matter of flipping a coin. Before making a final decision in either direction, it's definitely a good idea to know what distinguishes auto loans with low interest rates and rebates. That's the best way to determine which option best suits specific needs, including budgets and long term effects.

Try to have a thorough knowledge of what incentives are available before contacting any dealership. This includes rebates, low interest financing, disounts and other incentives. They know it's a volatile market. Retailers and manufacturers are constantly looking for promotions that will get you into the dealerships to buy their product. But don't dive in until you have an upper hand.

Know your price range and stay with it. Your credit history is all important. It can be a path to extremely low interest rates or disturbing high ones. If your monthly credit obligations are in good standing, you're in good shape. That will definitely give you room to negotiate a solid rate because the dealer knows you can go somewhere else, maybe even getting zero interest financing. Remember that incidentals like extended service contracts, auto protection, credit insurance, etc., are not included in the price of the car.


A rebate is a powerful motivator used by car dealerships and manufacturers to entice customers to buy. Rebates are amounts of the total cost that's returned to the consumer. It can be done by reduction, refund or return on any money to be contributed to the purchase. A rebate can cover a large portion of a down payment or completely cover the down payment, either way making any subsequent monthly payments smaller.

These incentives are heavily promoted. The market is fierce and the economy is revolving. Consumers are holding onto older products, like their cars, longer. Marketers are keenly aware one of the best ways to encourage customers is through the promise of saving while spending. Rebates support this line of thinking quite effectively.

There are several forms of rebates. An instant rebate is the ideal. In this situation, the promised cash return is applied instantaneously to the auto's price. Mail in rebates may arguably be the most common method applied to rebates. In this case, the consumer purchases the new vehicle at retail but they are supplied with a coupon, sales receipt or barcode. This data would be presented to the manufacturer, or in some cases, back to the retailer, via snail mail, phone or the Internet. The promised rebate amount would then be issued via paper check or a prepaid card. The process will typically take between four to eight weeks. There are rebate periods that can last up to twelve weeks. The state of Connecticut and Rhode Island require consumers offered the net price of any item after rebate receive that amount with purchase.

One disadvantage to a potential rebate is, of course, the customer will need to have the funds upfront. Despite any eventual savings, unless it's an instant rebate, waiting a good month or more to get that hard earned $1,000 back can be a tough call.

Rebates aren't only for the consumer. They've become a great marketing tool for retailers and manufacturers.

  • To activate a rebate, personal information can be collected. It's not unusual for the recipients to use that data for mining studies of consumer behavior.
  • Information can be utilized for marketing purposes, such as ‘do not call' lists and compilation of pre-existing business relationships.
  • Rebates allow manufacturers and dealers to move product at reduced costs while keeping other models at current prices. Straight price reductions could have a backlash effect across the board.
  • Studies show in general customers resent price increases for any reason. Rebates avoid this as the price isn't lowered and then raised, while still offering temporary discounts to stimulate sales and revenue.
  • Interest can be earned on the rebate amount during the turnaround time.
  • Rebates capture attention and can generate interest in business or a particular model.
  • Customers are expected to forget to use the rebate. It happens often. If there's a deadline, it's not unusual for the consumer to procrastinate and miss out on the opportunity. They also misplace the information.
Ultimately, rebates can be advantageous, saving thousands of dollars when purchasing a car.

Low Interest Auto Loans

There are a number of financial products that constitute financing for a new automobile. They all allow a consumer to acquire a vehicle without a lump sum payment. A third party supplies the financing. This can be the retailer, a bank, a lending institution or any combination therein. The buyer and lender enter into a contract agreeing on terms for repayment, as well as finance charges and the period of time given for repayment. This is the most common method for getting a new car.

Laws regarding auto loans can vary state to state. It might be prudent to contact your state's Attorney General or consumer protection agency to find out more about them. Federal laws for auto financing are strictly regulated.

  • Truth in Lending Act. Before signing an agreement for financing, the creditor is obligated to provide written disclosure regarding terms of the credit agreement including total amount of financing, total finance charges, APR, payment due dates, monthly payment amounts, length of agreement and late payment fees.
  • Credit Practice Rule. This requires any creditor to provide a written notice to any potential co-signers regarding the consumer's liability should that person fail to pay. It should prohibit late charges under certain circumstances. It should prohibit creditors from using specific contract provisions that has been deemed unfair to consumers by the government.
  • Equal Credit Opportunity Act. Discrimination of gender, race, color, religion, marital status and national origin or age is prohibited by federal law. A consumer also cannot be denied financing based on receiving public assistance or that have exercised their rights under the federal Consumer Credit Protection Act.
  • Fair Credit Reporting Act. Consumers are allowed by law to see their credit reports for free once a year. These reports can supply crucial information that may affect the opportunity to get financing. With the report in hand, consumers can dispute any information in their reports considered incomplete and inaccurate. They can contact reporting agencies and credit card companies to deal with the matters.

Right now, purchasing a vehicle is a buyer's market. Thanks to the Internet, consumers can easily find the most competitive rates in regions that they couldn't reach a decade ago. In today's environment, financing has never been easier and certainly hasn't been more convenient. With these advances, consumers are definitely in a better position to realize the range of financial options available to them.

Before agreeing to any loans, make sure you can cover monthly living expenses on top of the added payments. Most lenders will make that decision and could promptly reject you. Typical loans are usually based in 3 year (36 months), 4 year (48 months) or 5 year (60 months) periods. The total financing payments will be broken into equal payments across those time frames. If that payment plus living expenses exceeds monthly income, it's not likely any low interest financing will be approved. So, when looking at a new car, take these things into account and price your dream vehicle accordingly.

Here are some financing terms to be aware of:

  • APR (Annual Percentage Rate) – The cost of credit as expressed by percentage.
  • Assignee – The bank, finance or credit union company that purchases the financing contract.
  • Credit Insurance – Optional insurance that makes unpaid scheduled payments in the event of the customer's inability to do so. This can include, but is not limited to, death or being disabled. By law, the cost of optional credit insurance has to be disclosed in writing. The customer must agree to the terms and sign for it.
  • Down Payment – The initial amount paid to reduce the financing amount.
  • Extended Service Contract – An optional protection on the vehicle's mechanical and electrical components purchased to supplement any warranty coverage.
  • Finance Amount – The total dollar amount of the credit that the lender is providing to the customer.
  • Finance Charge – The total dollar amount paid to use credit for the new vehicle.
  • Fixed Rate Financing – The finance rate is guaranteed to remain the same throughout the life of the contract.
  • GAP (Guaranteed Auto Protection) – This will pay the difference between amount owed on the vehicle and amount you'll receive from your insurer if the vehicle is stolen or destroyed before you've fulfilled your credit obligation.
  • Monthly Payment Amount – The amount due each month to repay the financing.
  • Negotiated Price of the Vehicle – The purchase price of the car agreed upon by the dealer and the buyer.
  • Variable Rate Financing – The finance rate varies with the market, meaning the amount you will pay can change over the life of the contract without notice.
Auto loans are usually purchased by a third party at a later date. You may sign an agreement with one particular dealership or financial institution, but it's likely that another financial institution will buy the contract. At that point, any debt owed by the car buyer would now be paid to this third party.

Research & Preparation

It might be prudent to do a little research about current car finance conditions before looking at new cars. See whose offering the rebates, best rates, discounts, etc. In many cases, one could find their new car or have financing in place before ever setting foot in a car dealership.

There are resources to prepare for purchasing a new car. There are sites that review vehicles and compare prices; dealership and manufacturer websites that offer plenty of information; quotes for potential low interest financing; access to calculators that can tell a consumer if they're better off with a rebate or low interest financing and much more.

One exceptional platform for automotive research is marketplace websites that provide access to real time information.

  • TrueCar: With a national network comprised of approximately 5,300 certified car dealers throughout the country, TrueCar was founded in 2008 and has partnered with the like of USAA, Consumer Reports and AAA. With real time market data and pricing, they'll show you what other consumers have paid for a particular model in your area, lock in prices after connecting you with a dealer and streamline the entire car buying experience. In 2010, TrueCar was named one of the best websites for making better decisions about money. They called the site user friendly with great features.
  • CarsDirect: While they also generate leads and referral services to dealers, CarsDirect's portal is primarily for allowing consumers to price, research, purchase, as well as insure and finance, a vehicle online. They are essentially a one stop shop for buying and selling an auto without leaving your chair. They were rated the #1 site for buying new cars online by Forbes, PC Magazine and Time. They were the first online company to sell cars directly to customers. Before that, these services only referred consumers to dealerships.
  • IntelliChoice: For 25 years, IntelliChoice has been providing vehicle costs with sensible and accurate projections. Going beyond the actual cost of a new car, they provide six month rolling average fuel projections for that vehicle as well as five year projections about the overall cost of fuel. They also analyze manufacturer warranties and potential repairs. All this information gives a consumer a strong idea of what type of expenses will come with the car purchase.
  • CarMax: CarMax wants to streamline the process of buying used cars. They offer thousands of vehicles across the country with low prices and a promise that any car chosen will be transferred to the nearest dealer in your area. They offer financing and calculations in an easy to navigate interface. See customer reviews and ratings for any model. Compare multiple vehicles with their search tools. You can even get an appraisal for your current vehicle.
  • AutoTrader: AutoTrader utilizes a network of certified new and used car dealerships. Founded in 1997, it is currently the largest classified automotive site in the country. Perform research, go over reviews and advisement on current top picks and look for special offers in their search engine. They give pre-approved low interest auto loans and insurance through third party lenders. AutoTrader will also list your car for sale in their network. If you want to do things the old fashioned way, they will direct you to your nearest dealership.

Auto Loans vs. Rebates

Rebate Check.

You've done your responsible due diligence and through this careful research found the perfect car. You've gotten the answers to all the right questions. Now you're ready to shake hands, the first offering in sealing the deal. But first: low interest auto loan or rebate?

An auto loan will always be available. It's the interest rate that matters. As a rebate is a promotional tool, dealers have to offer it. You're should be aware of any rebates. If not, it never hurts to ask before sitting at the table. To start off the negotiations, inquire about a zero percent auto loan. These are auto loans where the financing come with no interest. Not everyone qualifies, but if you're putting down a sizeable down payment and have an outstanding credit history, you have a good chance.

An auto loan will only be approved if your credit history and current expenses fall in line with loan payments. If you are looking at the car of your dreams, use an auto loan calculator to predetermine what monthly payments will look like. Take that number and add it to your monthly expenses. This should include rent or mortgage, energy bills, phone bills. There's no real way to tell what a lender will uncover when they do their background search. They may even factor in an estimate of what you're spending on groceries. So be as comprehensive as you can. If that number exceeds monthly income, you may have to move down a notch on your list of dream cars. It's not merely about being denied the loan, per say. It's should also be about not wanting to bite off more than you can chew at this time. Going into debt over a car is not practical.

Compare and tread wisely. It's not unusual to be offered deals that come with no payments for a year. That can be incredibly enticing, especially in this economy. Overall, these incentives don't really do anything except put off the inevitable. On top of that, interest rates are more likely to rise. If you are given a locked in rate, what if they miraculously go down? In the long run, you won't necessarily save anything by prolonging the payments. You could end up paying more over the long haul. The better bet is to go for a lower rate or, yes, a rebate.

A rebate can reduce the balance of the down payment or lower monthly payments. If the loan rate is low, it may beat out the eventual savings of the rebate. If the rate on the loan is high, the manufacturer's rebate will probably be a better option. There are calculators that will compare rebates against low interest rate auto loans. Use them to determine which will suit your car buying needs in the long run. These tools will use:

  • Your state's sales tax rate for the new vehicle
  • Total purchase price of car before taxes
  • Amount of any down payments
  • If trading in, it will need the valued amount of that vehicle
  • Amount of the manufacturer rebate
  • Current and traditional finance percentage rate
  • Reduced finance percentage rate (if larger than zero)


There are really no hard and fast solutions to choosing between low interest auto loans and rebates. Use the calculators to establish which transaction is apt for the purchase. Whether you save (a) upfront or (b) in the long run and how that helps your overall budget should be the deciding factor. There are excellent calculators for this at sites like AutoTrader and Edmunds.

In a perfect world, you'd take the rebate and the low interest rate auto loan. That won't always be the case. It's a viable option for customers with outstanding credit. The rest of us will have to pick one or the other.

One of the easiest ways to shop for a car today is by getting a pre-approved loan first. It gives you a starting point. You can approach negotiations with a little more confidence knowing financing isn't on the table. Dealers are also exceptionally happy to deal with customers that have pre-approved auto loans up front. They certainly don't want you to take that money across the street.

Using websites like CarsDirect and TrueCar to help — maybe even find — your car can only help you. Familiarizing yourself with market trends, current APRs and potential discounts puts you at the advantage. Use that information and your budget to find the best vehicle that meets your desires and personal needs. Be realistic. We'd all love to have that one car but sometimes that simply isn't feasible.

Bring the best credit history possible to the negotiations. If your history is spotty, expect tough times. You might want to weigh getting a new vehicle now against waiting until you've gotten your credit back on track. That can take six months to a year of working with your creditors and paying your bills on time. That due diligence alone will serve you in more arenas than buying a car.

Buying a new car can be a daunting task and time consuming, especially if a consumer isn't aware of the best way to prepare for the ordeal. Hopefully, this information will help make finding a new car a little easier.

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