Cash Back or Low Interest Calculator
Understanding Cash Back vs Low Interest Offers
What is Cash Back vs Low Interest?
When financing a vehicle, you may be offered a choice between a cash-back rebate or a low-interest loan. This calculator helps you compare these options to determine which is financially better for your situation.
How the Calculator Works
The calculator compares the total cost of financing with a cash-back rebate against the total cost of a low-interest loan without a rebate. It takes into account:
- Vehicle purchase price
- Cash back rebate amount
- Loan interest rate
- Loan term in months
The Mathematical Formula
The calculator uses these formulas:
Effective Price with Cash Back = Purchase Price - Cash Back Amount
Monthly Payment = P × r × (1 + r)^n / [(1 + r)^n - 1]
Total Cost = Monthly Payment × Number of Months
Where:
P = Loan amount (Effective price or purchase price)
r = Monthly interest rate (Annual rate ÷ 12 ÷ 100)
n = Number of monthly payments
This helps you understand which financing option saves you more money over the loan term.
Key Components Explained
Vehicle Purchase Price
The total price of the vehicle before any rebates or financing.
Cash Back Amount
The rebate amount offered by the dealer or manufacturer.
Interest Rate
The annual interest rate on the loan, expressed as a percentage.
Loan Term
The duration of the loan in months.
Tips for Choosing the Best Option
- Calculate total cost for both options
- Consider your cash flow and monthly budget
- Evaluate the interest rate impact over time
- Check for any restrictions or conditions on rebates
- Consult with a financial advisor if unsure