Rebate or Interest Rate? Get the Most Out of Your Car Loan

Choosing Big Rebates or Low Financing Rates for Auto Loans

Harry Lloyd

Choose wisely

One of the most important steps when you are buying a car is getting the right instant auto financing for it. This crucial part of buying a car is often overlooked and hurried through, and ends up costing drivers more money in the long run.

People are often distracted by offers like zero percent financing or a cash back rebate that they don't take the time to find out which is actually a better auto deal for them. Some people swear by taking the better financing rates, while some other people swear by taking the rebates. Which is really better?

That all completely depends on the situation. Dealers often times benefit from drivers not taking the time to figure out which choice actually saves them the most money, but from now on you can be sure that won't be you.

For example

Let's say you find a Ford Taurus for $26,000 that you really like. Ford dealers are currently offering a choice for the Taurus, either 0% financing or a $2000 cash rebate, and you have good enough credit to qualify. Which should you take?

You already shopped around for the best rate you could find from your traditional lender, which was 5%. Counting your trade in, you have $5000 as a down payment, and there is a 7% sales tax as well.

If you finance it for 36 months, it turns out that choosing the manufacturer rebate will save you about $15 a month on your payments for a total of over $500 for the length of the loan. However, if you finance it for 60 months, choosing the financing saves you about $10 a month for a total of about $600 in savings.

Once you find out all the numbers, it's as simple as plugging the numbers into an online calculator that compares the two against each other for the entire duration of the loan. This is yet another case where doing your homework first can save you a ton of money.

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