0% APR vs Cash Rebate Calculator
The price, the two offers, and your own bank's rate
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the negotiated price and your down payment. Both stay the same whichever offer you take, so settle the price before you say how you will pay.
- 02
Enter the cash rebate you would give up and the promotional rate and its term. A 0% offer is entered as 0.
- 03
Enter the rate and term your own bank or credit union would give you. Get a real pre-approval: Experian's Q2 2026 new-car average was 6.35%, but tier averages ran from 4.41% to 16.11%.
- 04
If your state taxes the price after the rebate, check the sales tax rate under the advanced options; the page shows that case as its own figure.
- 05
Read which offer saves more and by how much, then the outside rate at which the two tie and the table of both offers across terms from 36 to 84 months.
Formula
Promotional path: loan = price − down payment; payment from the amortizing formula at the promotional rate (at 0%, the loan divided by the months); total = down payment + payment × months. Rebate path: loan = price − rebate − down payment; payment at the outside rate; total = down payment + payment × months. Saving = the difference between the two totals. The tie rate is the outside rate that makes the rebate path's total equal the promotional total, found by repeatedly halving the range between 0% and 60%. Where the state taxes the price after the rebate, the rebate path also saves rebate × sales tax rate.
Example
A $42,000 car with $5,000 down and a choice between a $3,000 rebate and 0% for 60 months, against a 6.35% credit union loan over 60 months. At 0% you borrow $37,000 and pay $617 a month, $42,000 in all. Taking the rebate you borrow $34,000 and pay $663 a month, $44,772 in all, including $5,772 of interest. The promotional rate saves $2,772, and the two would tie at an outside rate of 3.38%. On a 36-month term the gap shrinks to $431; on 84 months it grows to $5,203. Where the rebate is not taxed, taking it saves $226 of tax at 7.53%, and the promotional rate is still ahead by $2,546.
Definitions
- Promotional APR
- A below-market rate offered through the manufacturer's finance arm, often 0%, usually limited to buyers with strong credit and to certain terms.
- Cash rebate
- Money off the purchase offered by the manufacturer, usually as an alternative to the promotional rate rather than in addition to it.
- Break-even rate
- The outside loan rate at which taking the rebate and taking the promotional rate cost the same in total.
- Captive lender
- The finance company owned by a carmaker. It is the lender that offers promotional rates, and giving up the rebate is often the price of accepting one.
- Qualified passenger vehicle loan interest
- The IRS term for car loan interest deductible in tax years 2025 through 2028 on a loan for a new, US-assembled, personal-use vehicle, claimed on Schedule 1-A.
Good to know
Why a carmaker offers the choice at all
A promotional rate and a cash rebate are two ways for a manufacturer to spend the same marketing money. A rebate is cash taken off the purchase. A promotional rate is a subsidy paid through the manufacturer's own finance company, the captive lender, which lends below market and absorbs the difference. For the manufacturer, both lower the effective price of the car. For the buyer, they are usually alternatives: take the rebate and arrange your own loan, or give up the rebate and borrow at the promotional rate. Which is worth more depends entirely on numbers that differ from buyer to buyer. The rebate's value is fixed in dollars. The promotional rate's value is the interest it saves, which grows with the size of the loan, the length of the term and the rate you would otherwise pay. That last figure is personal, because it depends on your credit. In 2026 the choice itself has become scarce. Edmunds found just 1.2% of new-vehicle buyers financed at 0% APR in Q2 2026, down from 2.6% in the first quarter, while Experian put the average new-car loan rate at 6.35%. Promotional rates are generally reserved for buyers in the top credit tiers and are often limited to certain models and certain terms, so the first step is to confirm that you actually qualify for the rate advertised, on the term you want. The second step is to get a real outside quote. A pre-approval from a bank or credit union gives you the rate the rebate path would really carry, and without one the comparison rests on a guess. With both offers and a genuine outside rate in hand, the arithmetic on this page settles the question in dollars.
The arithmetic: interest saved against cash in hand
Each path has a total cost, and the cheaper total wins. On the promotional path you borrow the price less your down payment at the promotional rate. On the rebate path the rebate comes off first, so you borrow less, but at your outside rate. On this page's defaults the car is $42,000 with $5,000 down, the rebate is $3,000, the promotional rate is 0% for 60 months, and the outside loan is 6.35% for 60 months. At 0% you borrow $37,000 and pay $617 a month, $42,000 in all, with no interest. Taking the rebate you borrow $34,000 and pay $663 a month, $44,772 in all, of which $5,772 is interest. The promotional rate saves $2,772, because the interest on the outside loan is larger than the rebate. The page also finds the outside rate at which the two paths cost exactly the same. There is no tidy formula for it, so the page searches for the rate where the rebate path's total equals the promotional total. On the defaults that tie rate is 3.38%. If your outside rate is below it, take the rebate and borrow elsewhere; if it is above, take the promotional rate. The tie rate explains the answer better than the saving alone does. A larger rebate raises it, because more interest has to accumulate before the promotional rate catches up. A larger loan lowers it, because the promotional rate saves interest on every dollar borrowed. And the promotional rate need not be zero. An offer of 1.9% against a rebate works in exactly the same way, and entering the real promotional rate is what keeps the comparison honest. The chart shows cash out of pocket year by year on both paths, so you can see the gap widen as the payments accumulate.
Term, credit tier and the tie rate
The loan term changes this comparison more than most buyers expect. The longer the loan, the more interest the rebate path pays, while the promotional path pays none at 0%. On the defaults, with both offers on the same term, the promotional rate saves $431 over 36 months, $1,590 over 48, $2,772 over 60, $3,976 over 72 and $5,203 over 84. The tie rate falls as the term lengthens, from 5.57% at 36 months to 2.42% at 84. So a rebate that clearly wins on a short loan can lose on a long one. That matters because long loans are now common: Edmunds found 23.9% of new-vehicle buyers took terms of 84 months or more in Q2 2026. It also matters because promotional rates are often restricted to shorter terms. When the promotional rate is offered only over 36 or 48 months and the outside loan runs 72, the two totals are no longer like for like. The longer loan spreads the same money over more months, and a dollar paid years from now is worth somewhat less than a dollar today. The table puts both offers on the same term at each length, which is the cleaner comparison. Credit decides where your outside rate falls against the tie. Experian's Q2 2026 averages for new-car loans were 4.41% for super prime borrowers, 6.15% for prime, 9.71% for near prime, 13.52% for subprime and 16.11% for deep subprime. On the defaults a super prime buyer at 4.41% is still above the 3.38% tie at 60 months, but only just, and would be below it on a 36-month loan, where the tie is 5.57%. A buyer whose outside rate is high is usually better off with the promotional rate, if the captive lender approves them for it.
Tax: the rebate's sales tax and the new interest deduction
Two tax rules can move this comparison, one at the dealership and one at filing time. The first is sales tax on the rebate. Washington's Department of Revenue says manufacturer rebates are part of the selling price, so tax is charged on the price before the rebate comes off, and both paths pay the same tax. Roughly twenty states instead tax the price after the rebate, and there the rebate also saves sales tax. On the defaults a $3,000 rebate at 7.53% saves $226, which narrows the promotional rate's lead from $2,772 to $2,546. The second is the federal deduction for car loan interest. For tax years 2025 through 2028 you can deduct up to $10,000 a year of interest on a loan originated after 31 December 2024 for a new vehicle for personal use, with final assembly in the United States and a gross vehicle weight rating under 14,000 pounds. It is claimed on Schedule 1-A whether or not you itemize, the vehicle identification number must be reported, leases do not qualify, and the limit falls by $200 for each $1,000 of modified adjusted gross income above $100,000, or $200,000 on a joint return. A 0% loan produces no interest to deduct, so the deduction tilts the comparison toward the rebate and an outside loan. On the defaults, about 27 payments on a loan signed now fall before the end of 2028, and the interest on them would be worth roughly $862 to a qualifying buyer in the 22% bracket. That is not enough to overturn a $2,772 gap, but on a closer comparison it could be. One more factor favours the rebate: paying the loan off early. Interest stops when the balance is cleared, but the rebate was banked on day one, while a 0% loan paid off early saves nothing.
Frequently asked questions
Is 0% APR better than a cash rebate?
It depends on the size of the rebate, the rate you can get elsewhere and the term. On the defaults, a $42,000 car with $5,000 down, a $3,000 rebate and a 6.35% outside loan over 60 months, the 0% offer costs $42,000 and the rebate path $44,772, so the promotional rate saves $2,772. The two would tie if the outside loan were 3.38%.
How do I find the break-even interest rate?
Find the outside rate at which the rebate path's total, the down payment plus every payment on the smaller loan, equals the promotional deal's total. There is no simple closed formula, so the page searches for it. On the defaults it is 3.38%: below that, take the rebate and borrow elsewhere; above it, take the promotional rate.
How common is 0% financing in 2026?
Rare. Edmunds found 1.2% of new-vehicle buyers financed at 0% APR in Q2 2026, down from 2.6% in the first quarter. Promotional rates are usually reserved for buyers with top-tier credit and are often limited to particular models and terms.
Does a longer loan change the answer?
Yes, and usually toward the promotional rate, because the longer the loan, the more interest the rebate path pays. On the defaults the promotional rate saves $431 over 36 months but $5,203 over 84 months, and the break-even outside rate falls from 5.57% to 2.42%. Promotional rates are often offered only on shorter terms, so check which terms the offer actually allows.
Does sales tax affect the choice?
Only in states that tax the price after the rebate. Where the price is taxed before the rebate comes off, as Washington's Department of Revenue requires, both offers pay the same tax. Where it is taxed after, the rebate also saves tax: $226 on a $3,000 rebate at 7.53%, which on the defaults narrows the promotional rate's lead from $2,772 to $2,546.
Does the car loan interest deduction change the comparison?
It can tilt it toward the rebate, because a 0% loan has no interest to deduct. For tax years 2025 through 2028 you can deduct up to $10,000 a year of interest on a loan taken out after 2024 for a new, personal-use vehicle with final assembly in the United States, phasing out above $100,000 of modified AGI ($200,000 joint). On the defaults about 27 payments fall inside that window, worth roughly $862 to a qualifying buyer in the 22% bracket, which is not enough to overturn a $2,772 gap.
What if I plan to pay the car off early?
Then the rebate path looks better than this page shows. Its interest stops when the balance is cleared, but the rebate was banked on the day you bought the car. A 0% loan paid off early saves nothing, because it never charged interest. The comparison here assumes both loans run their full terms.