Cash Back or Low Interest Calculator

What this cash back calculator does

Car dealers often offer a choice between a cash-back rebate and a lower interest rate. This calculator compares both offers using the same vehicle price, down payment, trade-in, loan term, sales tax, and fees.

The result shows the loan amount, monthly payment, total interest, and total cost for each offer, then identifies which option costs less overall.

How to use this calculator

1. Enter the cash-back amount and the higher interest rate.
2. Enter the lower interest rate offered instead of the rebate.
3. Enter the vehicle price, loan term, down payment, and trade-in value.
4. Enter the sales tax rate and any fees.
5. Choose whether fees are included in the loan.
6. Click Calculate.

The default example compares $1,000 cash back at 5% with a 2% rate on a $50,000 vehicle, $10,000 down, 60 months, 7% sales tax, and $2,000 in fees.

Cash back vs. low interest formula

The cash-back offer reduces the amount financed:

Cash-back loan = Price − Cash back − Down payment − Trade-in + financed fees

The low-rate offer keeps the larger loan but uses the lower rate:

Low-rate loan = Price − Down payment − Trade-in + financed fees

Monthly payments use the standard amortizing loan formula. Total cost includes the vehicle price, sales tax, fees, and total interest, less any cash back.

What the results include

• Loan amount: the amount financed under each offer.
• Sales tax: tax on the vehicle price after any trade-in.
• Upfront payment: down payment plus any fees not financed.
• Monthly payment: principal and interest.
• Total payments: monthly payment multiplied by the term.
• Total interest: total payments minus the loan amount.
• Total cost: price, tax, fees, and interest, less cash back.
• Winner: the offer with the lower total cost.

Assumptions and limitations

The calculator assumes a fixed-rate, fully amortizing loan and a constant sales tax rate. It does not include manufacturer incentives that change the tax basis, insurance, registration, maintenance, or prepayment penalties. State tax rules vary, so confirm how rebates and trade-ins are taxed in your state.

Frequently asked questions

Is cash back always better than a low rate?

No. A large rebate can beat a small rate reduction, while a low rate can beat a small rebate over a long loan. Compare the total cost, not just the monthly payment.

Does the cash-back amount reduce sales tax?

In this calculator, sales tax is based on the vehicle price after trade-in, not reduced by the cash-back amount. Some states tax rebates differently.

Why is the monthly payment lower with the low-rate offer?

The low-rate offer finances a larger amount but charges less interest. The monthly payment can still be lower if the rate reduction is large enough.

Should I compare total cost or monthly payment?

Total cost is the better measure of which offer is cheaper. A lower monthly payment can come from a longer term and cost more in interest.

Source

References:

• Consumer Financial Protection Bureau — Auto Loans
• Consumer Financial Protection Bureau — Rebates

Disclaimer

This calculator is for informational purposes only. It is not a financing offer or financial advice. Confirm rebate, tax, and fee treatment with the dealer and lender.