This article describes how taking the lower interest rates over the manufactuer rebate is not always the right choice.
To receive the best interest rate with auto credit ratings decreasing, you will need the very best credit report to get a 0% interest rate. But with large cash incentives it is not always wise to take the lowest interest rates because you will never regain it back.
Let's assume a car costs $30,000 and you have a manufacturer rebate of $6,000 and the interest rate is 4.9%. Your loan after taxes would be $25,440 with a monthly payment of $478.92. At the end of the 60-month term your total of all of your payments would be $28,735.18. A low interest incentive loan at 0.00% results in a loan of $31,800 with a monthly payment of $530.00.
0.00% Low Interest Financing
$6,000 Manufacturer Rebate
Interest rate:
0.00%
4.90%
Term in months:
60
60
Total purchase price (before tax):
$30,000
$30,000
Manufacturer rebate:
$0
$6,000
Price after rebate:
$30,000
$24,000
Sales tax*:
$1,800
$1,440
*Sales tax was calculated as 6.00% times your after rebate price.
Total sales price (after tax):
$31,800
$25,440
Total down payment**:
$0
$0
Loan amount:
$31,800
$25,440
Monthly payment:
$530.00
$478.92
Total payments***:
$31,800.00
$28,735.18
Total interest paid***:
$0.00
$3,295.18
The manufacturer rebate would save you $3,065 in total payments.
