Low APR vs Cash Back: How to Choose? [Calculator]

low apr vs cash back

Deciding on which deal to use can potentially mean saving a couple of hundred or a few thousand dollars. You typically will not be able to get both incentives at once, meaning you'll have to choose one or the other.

Today, we'll break down everything you must consider when making this decision for your car purchase.

Car Loan Calculator (Low Interest vs. Cashback)

Use the loan calculator below to determine which type of incentive will save you the most money on your car payments.

This calculator provides an estimate to help you make a decision but accuracy is not guaranteed and may not reflect all fees and taxes. Read your specific offer terms carefully before accepting any promotional offers from car dealers.

How Cashback Offers Work?

how cashback worksCashback sounds amazing, but you're not simply getting cash or a check from the dealer. Essentially, cashback becomes a discount on the selling price of a new car. Some dealers may allow you to choose to get the money back directly, but it usually applies to the purchase price. Cashback is also known as bonus cash, rebates, cash incentives, or cash rebates.

Read more about how cashback works.

However, it really impacts your cost in more ways than a price discount. By lowering the price of the car, you can also take out a smaller loan, reduce the length of financing, or be able to afford a nicer vehicle without going over your budget. Even with a cash rebate, you can still negotiate the price of the car and fee discounts.

Here is a list of all of the cashback offers available right now.

How Does Zero Percent Financing Work?

how 0 financing worksZero percent financing, or 0% APR, is when the dealership waives the loan fees and interest as an incentive. Low-interest offers can greatly vary in how much money they will save you, but zero percent financing is typically the most appealing since you're not paying any interest on the car loan. Learn more about extended car loans here.

However, zero percent financing is not without a few catches. Some of these include being a well-qualified buyer with a high credit score.

Here's our picks for the best 0% APR car deals for this month.


When Does Cashback Make Sense?

when does cashback make senseThere are some situations where the manufacturer cash rebate would save you more money than a low APR or zero-percent financing option. You should consider cashback when:

  • You have a high-value trade-in and do not need to borrow a lot of money to buy your vehicle.
  • You plan to pay cash or make a very large down payment that reduces the size of your auto loan.
  • You are not a well-qualified buyer. 0% APR loans require you to be a well-qualified buyer with excellent credit.

Tip: Often the cashback option requires that you use dealer financing.  However, most auto loans allow an early payoff without penalty.  So if the dealer's loan rate is high, you can sign up for the loan and then refinance it soon after you get home.

Check Your Credit Score

Credit score plays a big role when considering a 0% APR or cashback deal. Lenders, including dealers, carefully examine your credit score and overall borrowing qualifications to determine if you qualify for zero-percent financing. Before even considering a 0% APR deal, you'll want to make sure that you have a credit score of at least 700-720.

How to Find a Low APR Loan or Cash Back Deal

how to find low apr cashbackManufacturers update their incentives every month, and we compile the best 0% APR and cashback deals from each manufacturer. Some even put out deals that combine the two, so you can get a 0% APR deal with cashback. You can also join our Car Deals Early access list to receive email notifications anytime we update the deals (link in footer).

Both cashback and zero-percent financing have the potential to save you a lot of money on your car purchase. Typically, you can only choose one deal for your purchase, so it's important to choose the option that will save you the most money.

Frequently Asked Questions

0% APR or cashback, which one is better?

Every car purchase is unique, and there's no definitive answer when choosing between low/0 APR or a cash rebate. You'll need to use an APR vs Cashback Calculator to directly compare the two deals you are looking at for your purchase.

What credit score do I need to qualify for car incentives?

Most often, you'll need very good credit (700-720 at least) to qualify for 0% APR financing. Credit score doesn't have too big of an impact on cashback offers. However, you'll always need to read the fine print on any incentive to know what the qualifications are.

Can I still negotiate with an incentive?

Yes! You can and should still negotiate to get the best car price and financing possible even if the sale includes an incentive like 0% APR or cashback.

How can I find cashback or 0 APR deals?

Manufacturers change their incentives every month, so you'll need to monitor the incentives for the models you're interested in. The easiest way is to check out the best 0% APR deals and the highest cashback offers that we update every month.