Auto rebate vs. low interest rate

When purchasing a new car, if you’re presented with an option of choosing either a manufacturer rebate on the vehicle or a low interest rate on the financing for the vehicle, consider yourself lucky. This is definitely a good problem to have.

Even though you are indeed lucky to have this “problem,” you do still have to make a choice. So, which option is better? Should you take the rebate or the low interest rate on the auto loan? As with many personal finance questions, the answer to this question is a resounding “it depends.”

Generally speaking, if you are planning to finance the vehicle for a longer term (i.e. 60 months), a significant drop in the interest rate will likely save you more money over time than taking a rebate upfront. But, this obviously depends on the exact figures. For example, a sizeable rebate could actually you more money if the rebate amounts to a good percentage of the total amount that will be financed. The answer really does depend on the specifics of your situation.

Luckily, there is an easy way to estimate which option is a better choice. If you do find yourself choosing between rebate and financing options, make use of our calculator below (or a similar one elsewhere) to help calculate which option will produce the most savings for you.

Recommended resource: Auto rebate vs. low interest financing calculator