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Cash Back vs Low APR Calculator

Enter the offer details to see whether cash back or low APR wins.

How it is calculated

Each option is a standard fixed-rate amortising loan, and the tool compares total repayment. The monthly rate is r = APR ÷ 100 ÷ 12, the payment is P × r ÷ (1 − (1 + r)−n) and the total is payment × n, where P is the amount borrowed and n the term in months. Option A (cash back) finances price − rebate at the market APR; Option B (low APR) finances the full price at the promotional APR. At 0% the total is just the amount borrowed. The cheaper total wins and the difference is the saving. Down payments, taxes, fees, trade-in value and the time value of money are not modelled, and the rebate must be smaller than the price.

Worked example

Price 35,000, rebate 2,500, low APR 1.9%, market APR 6.5%, 60 months. Option A: borrow 35,000 − 2,500 = 32,500 at 6.5%. The payment is about 635.90, so the total is 635.90 × 60 = $38,153.99. Option B: borrow 35,000 at 1.9%, payment about 611.94, total $36,716.50. Option B is lower, so the low-APR offer wins and saves 38,153.99 − 36,716.50 = $1,437.49. The rebate saves only 2,500 up front, but 6.5% interest costs more than that over five years.

Try this example →

Common mistakes

  • Judging by the monthly payment alone. A longer term lowers the payment but raises total interest, so compare total cost, which is what the tool reports.
  • Entering the term in years. It is in months, so 5 years is 60.
  • Using the dealer's own offer rate as the market APR. The market APR should be what your bank or credit union would really give you; otherwise the cash-back option is misjudged.
  • Entering the price after the rebate. Enter the full price, and the rebate separately, or the rebate is deducted twice.
  • Ignoring that low-APR deals often require top credit scores. If you would not qualify for the promotional rate, the comparison does not apply to you.

Sources

About this calculator

The cash back vs low APR calculator compares two common car-financing offers side by side: taking a cash-back rebate up front but financing the (higher) remaining balance at the standard market APR, versus skipping the rebate to get a promotional low or 0% APR on the full purchase price. It computes the total interest paid and total cost under each path over your loan term so you can see the actual dollar difference, not just which incentive sounds bigger.

Which option wins depends heavily on the loan term, the spread between the market rate and the promotional rate, and the rebate amount — a large rebate often beats a low-APR offer on a short loan, while a steep APR gap tends to favor low APR on longer terms. Car buyers comparing dealer financing offers use this calculator to run the actual numbers before signing, since dealers rarely volunteer a side-by-side comparison.

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Comments (1)

  • Editorial team

    Treat the rebate as the number to experiment with. With the preset price, rates and 60 months, the two offers come out about even at a rebate near 4,500: below it the low rate costs less overall, above it the cash back does. Try your dealer's real rebate and see how far you are from that tipping point. The tool uses one term for both offers, so which term does your dealer attach to the promotional rate?

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