The short version: Against a 0% promotional APR, a rebate only wins if it exceeds a fixed percentage of the vehicle price — 15.8% on a 60-month loan when your alternative rate is 7%. Real dealer rebates are typically 4% to 10% of price. That is why the promotional financing usually wins, which is the opposite of the advice most people are given.
The choice, stated properly
You are offered one of two things on the same car:
- Option A — take the cash. A rebate comes off the price, and you finance the smaller amount at whatever rate you actually qualify for elsewhere.
- Option B — take the promotional rate. You pay full price, but finance it at 0%, or 1.9%, or whatever the manufacturer is subsidising.
Neither is obviously better, because they trade a smaller principal against a cheaper rate. The comparison people usually make — monthly payment — is the wrong one, since the two options often run different terms and a lower payment can mean more total money. The only figure that settles it is total paid over the life of the loan.
The finding: the price is irrelevant
Run the break-even at a fixed term and rate gap, and the answer comes back as an identical percentage of price every time. At 60 months against a 7% alternative rate:
| Vehicle price | Break-even rebate | As a share of price |
|---|---|---|
| $15,000 | $2,375 | 15.830% |
| $25,000 | $3,958 | 15.830% |
| $35,000 | $5,541 | 15.830% |
| $50,000 | $7,915 | 15.830% |
| $80,000 | $12,664 | 15.830% |
| $120,000 | $18,996 | 15.830% |
Not approximately equal — identical to three decimal places. Both options scale linearly with the amount borrowed, so the price cancels out of the comparison entirely. What is left depends on only two things: the term and the gap between the promotional rate and the rate you would otherwise pay.
That is what makes this worth carrying around. You do not need to run a calculation per car. You need one percentage, and you check whether the rebate on the windscreen beats it.
The break-even table
Break-even rebate as a share of the vehicle price, against a 0% promotional APR. If the rebate on offer is above the figure in your row and column, take the cash. If it is below, take the financing. Because these are percentages, they hold in any currency.
| Your alternative APR | 36 months | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|---|
| 4% | 5.9% | 7.7% | 9.5% | 11.2% | 12.9% |
| 5% | 7.3% | 9.5% | 11.7% | 13.8% | 15.8% |
| 6% | 8.7% | 11.3% | 13.8% | 16.2% | 18.5% |
| 7% | 10.0% | 13.0% | 15.8% | 18.5% | 21.1% |
| 8% | 11.4% | 14.7% | 17.8% | 20.8% | 23.6% |
| 9% | 12.6% | 16.3% | 19.7% | 22.9% | 26.0% |
| 10% | 13.9% | 17.9% | 21.6% | 25.0% | 28.3% |
| 11% | 15.2% | 19.4% | 23.3% | 27.0% | 30.5% |
| 12% | 16.4% | 20.9% | 25.1% | 29.0% | 32.6% |
Two patterns run through it. Longer terms raise the bar, because a longer loan gives the 0% offer more interest to save you — at 7%, the threshold climbs from 10.0% over 36 months to 21.1% over 84. And a worse alternative rate raises it too, for the same reason: the further your own rate is above the promo, the more the promo is worth.
A worked example
A $35,000 vehicle. The dealer offers either $2,500 cash back or 0% for 60 months. Your bank has pre-approved you at 7%.
- Option A: take the $2,500, finance $32,500 at 7% for 60 months. Payment $644, total paid $38,612.
- Option B: pay full price, finance $35,000 at 0% for 60 months. Payment $583, total paid $35,000.
The financing wins by $3,612 — and it also has the lower monthly payment, so there is no trade-off to weigh. The break-even for that row is 15.8%, or $5,541. The $2,500 on offer is 7.1% of price, less than half of what it needed to be.
Shorten the term to 36 months and the gap narrows sharply: $36,126 against $35,000, so the financing still wins, but by $1,126 rather than $3,612. The break-even falls to $3,513. This is the general shape — cash gets more competitive as the term shortens, because there is less interest for a 0% offer to save.
You can run your own numbers, in your own currency, with the cash back vs low APR calculator.
Why the usual advice is backwards
"Take the cash, you can always refinance" is the standard line. Put the numbers next to it:
| A typical rebate | Share of price | Needs to beat (60mo, 7%) |
|---|---|---|
| $1,500 on a $35,000 car | 4.3% | 15.8% |
| $2,500 on a $35,000 car | 7.1% | |
| $3,500 on a $35,000 car | 10.0% |
Manufacturer rebates in the ordinary run of things land between about 4% and 10% of the price. The threshold at the most common financing term sits at 15.8%. The rebate is not close, and the promotional financing wins comfortably in the typical case.
The intuition fails because a rebate is visible and immediate while interest is spread over five years, so the rebate feels concrete and the interest feels abstract. On a $35,000 car at 7% over 60 months, that abstract interest is $6,583 — more than two and a half times the rebate that was competing with it.
When the cash genuinely does win
Four situations flip it, and they are worth checking before you follow the table:
- You are not going to finance much. The whole comparison assumes you borrow. Paying cash, or borrowing very little, makes a 0% offer nearly worthless and the rebate the only real money on the table.
- A short term. Over 36 months at a 4% alternative rate, the bar is only 5.9% — a rebate can clear that.
- You do not qualify for the promotional rate. Subsidised financing is usually restricted to top-tier credit. If the 0% is advertised but you are offered 6.9%, the comparison you should be running is the rebate against that rate, not against the headline.
- The promotional term is shorter than you want. Manufacturers often cap 0% at 36 or 48 months. If you need 72, you are comparing a rebate over 72 months against a promo you cannot actually take.
There is also a real trap in the middle of this: a 0% offer makes a more expensive car feel affordable, and the discipline the payment usually imposes disappears. The correct comparison is always the same car under both offers.
What the table assumes
Straight amortising loans on both sides, the same term for both options, no down payment or trade-in, and no fees. Those are simplifications and each moves the answer a little.
A down payment or trade-in reduces both principals by the same amount, which shifts the break-even up as a share of the financed sum — if you are putting a lot down, run the actual numbers rather than reading the table. Dealer documentation fees and any origination cost belong on whichever side charges them. And the alternative rate to use is the one you have actually been quoted, not an advertised best rate; the interest rate calculator recovers it from a payment if your lender only quoted you a monthly figure.
One last thing worth stating: the comparison here is purely about which offer costs less. It says nothing about whether the car is a good idea. The car loan calculator covers what the payment does to your budget, and prepay or invest covers what to do with the difference if the financing option leaves you with spare cash each month.