Cash Back vs. Low Interest Calculator

How does this tool model the cash-back option?

This tool uses the rebate to reduce the amount borrowed: the loan is price minus cash back, charged at the standard rate. With a $35,000 price and $2,000 cash back, $33,000 is financed at 7.5% over 60 months, giving $661.25 a month. The rebate is not added again to the total, because it has already lowered the loan. If you would rather take the money and borrow the full price, this tool does not model that.

How does it model the low-interest option?

The full price is financed at the dealer rate for the same term. On the starting values that is $35,000 at 1.9% over 60 months, a payment of $611.94 and $1,716.50 of interest. At a rate of 0% the payment is just price ÷ months and interest is $0.00.

What does “Total Payments” mean?

It is the monthly payment multiplied by the number of months, so it contains interest and the amount financed but nothing paid up front. The comparison line subtracts the low-interest total from the cash-back total: $39,675.14 minus $36,716.50 leaves $2,958.64 in favour of the low-interest option on the starting values.

How does the loan term change the comparison?

Interest builds up with time, so the gap moves with the term even when every other input is fixed. On the starting values the cash-back option comes out $57.23 lower at 24 months, while the low-interest option comes out $919.52 lower at 36 and $4,020.74 lower at 72. The table in the article below lists each term.

What is not in the calculation?

Sales or purchase tax (which can depend on whether it is charged before or after the rebate), registration and dealer fees, a down payment or trade-in, insurance, and any penalty for repaying early. There is also no down payment field, so the whole price less any rebate is borrowed.

Where should the standard rate come from?

You type it. The tool does not know what rate you would be approved for, and neither rate is a market figure. Lenders set rates and approval criteria that change over time and vary between people, so the rates in a written offer govern.

What happens with unusual inputs?

A price of 0 returns an error asking for a price above 0, a cash back larger than the price returns an error, and so does a term under 1 month. A cash back of 0 is allowed and simply compares the two rates; a 0% standard or low rate is used as zero. Totals within half a cent read as equal, a cleared number box counts as 0 (so a cleared price or term returns an error), and negative numbers are treated as 0.

Does the tool say which deal to take?

It reports which option has the lower total payments and by how much, plus the monthly difference. It does not weigh monthly cash flow, your credit approval, or how long you will keep the vehicle. Those are your decisions, and a dealer or lender can confirm the offers.