Each line shows the total dollars paid so far as the months pass. The cheaper option stays lower, and the gap between the lines at the end is what you save by choosing it.
| Offer | Amount financed | Rate | Monthly payment | Total interest | Total cost |
|---|
The choice: cash or a low rate
Manufacturers often advertise two incentives on the same car: a cash rebate (money off the price) or special promotional financing (a low interest rate, sometimes 0%). Almost always you must pick one. The rebate makes the loan smaller; the promo rate makes the loan cheaper to carry. Which one saves more depends on the numbers.
How each option works
If you take the rebate, the rebate comes off the price, and you borrow the smaller amount at the normal market rate — the everyday rate a lender charges. If you take the promo rate, you give up the rebate and borrow the full price, but at the lower promo rate. This page runs both as standard amortizing loans over the same term and adds up every payment.
Why a 0% loan is not free
A 0% promo rate means you pay no interest, which sounds unbeatable. But to get it you gave up the rebate, so you are really paying extra by financing a higher price. The rebate you skipped is the hidden cost of the 0% loan. The fair comparison is total dollars paid, not the interest rate.
The break-even rebate
The break-even rebate is the rebate amount that would make both options cost exactly the same. If the rebate on offer is bigger than the break-even number, taking the cash wins. If it is smaller, the promo rate wins. It turns a fuzzy choice into a single number to compare against.
The break-even rebate grows when the market rate is high (because cheap financing is worth more) and shrinks when the market rate is low (because the financing you give up was not saving you much anyway).
Why the market rate matters so much
The value of promo financing is really the gap between the market rate and the promo rate. When market rates are high, a 0% offer saves a lot of interest, so it is hard for a rebate to beat. When market rates are low, the interest you avoid is small, so even a modest rebate can come out ahead.
Paying the loan off early shrinks the rate's value
The value of the promo rate assumes you keep the loan for the full term. Most of the interest you avoid is in the later years, so a low rate only pays off fully if you stay in the loan that long.
If you pay the loan off early — say you take a 5-year loan but trade the car in after 3 years — you never reach those later years, so the promo rate saves you less than the calculator shows. The rebate, by contrast, is money off the price up front, so its value does not shrink if you pay early. The shorter you expect to keep the car, the more the rebate is worth.
Things this page keeps simple
Real offers can add wrinkles. Promo rates are sometimes only available on shorter terms, which would change the monthly payment. Your credit score affects the market rate you actually qualify for, and a rebate paid as cash today is worth slightly more than the same dollars spread over the loan. The core comparison here — total dollars paid each way — is still the right place to start.
Key takeaway
Do not choose by the interest rate or the size of the rebate alone. Add up the total cost of the car each way. Take the rebate when it beats the break-even number, and take the promo financing when it does not — and remember that high market rates favor the low rate while low market rates favor the cash.