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The Best Car Deals – Low Finance Rates Vs Rebates – Which Should You Choose?


The Best Car Deals – Low Finance Rates Vs Rebates – Which Should You Choose?


The Best Car Deals – Low Finance Rates Vs. Rebates – Which Should You Choose? How to understand Rebates and low financing offers Vehicle MSRP: Manufacturers Suggested Retail Price – This price is always negotiable – don’t ever agree to pay MSRP Exception: Some vehicles that might be “hard to find” or “limited in production” might be sold by the dealers at MSRP or, sometimes higher. This is usually called Market Adjustment.

Manufacturers Rebates: This is your money and has nothing to do with discounts given by the dealership. This money is given to you directly from the factory. Never let the rebate be used as a negotiation tool by the dealer. Any discount or negotiation from the dealer should be separate from any rebates offered.

Low finance rates: 0.00% 1.00% 1.9% etc… These are called Sub-vented rates; they too are offered by the factory and not the dealership. Do not allow a “low” finance rate to be used as part of a negotiation by the dealer. These rates are granted over and above any discounts, rebates, etc.

Exceptions: There are several exceptions to Sub-vented finance rates, but here are two that you really should be aware of:

1. Not all people qualify for these rates. So, if you suspect that you might have some issue that will cause you not to qualify, there is nothing wrong with expressing to the dealer that the low finance rate is something you are interested in, and you would like to apply first before going through the long, timely steps of deal negotiation. Many dealerships will view this as unusual; however, any “good” dealer will be happy to let you apply first if you insist. Why is this important?

As we always say, knowledge and preparation are the keys to not overpaying at a dealership. What happens if your entire deal is worked, negotiated, and finalized with the dealer? Then you head over to the finance office to finalize the finance terms and payments. You expected to pay 0.00% interest; then, at the last second, you are told: “Sorry” because you don’t qualify. NOT GOOD THE WHOLE DEAL CHANGES.

2. Rebates and “low” finance rates can not always be combined. Some factories allow it sometimes; however, there is no rule; you must do your homework first. For instance, Chrysler offers manufacturers rebates on most of their vehicles, plus they offer low finance rates on most vehicles. Though you, the customer, must decide which offer you want, you can’t have both. Although, sometimes Chrysler will run special offers that allow you to “combine” both the financing and rebate offer at once. But be careful; dealers won’t always tell you that these offers are available; if you are unaware and agree to pay higher finance rates, you are stuck.

Commonly Asked Question: Which is the right choice, Rebate or Low Financing?

This is an interesting question asked by many customers, the answer is simple, yet many people have no idea. Remember this rule: You should do what’s best for you, do not ever inquire with a person, dealer, or anyone else that has any other motive than what’s best for you. What that means is this: When you ask a dealership which makes more sense, the dealer will likely tell you: “Take the rebate – not the low-interest rate.”


The reasoning behind this answer is, if you take the rebate, you are actually paying “less” for the vehicle than if you elected the low-interest rate. So, being that the vehicle price is the most important issue, you should always take the rebate. Is this correct or incorrect?

Rule: Don’t be concerned about what the dealer is making or losing; it’s not relevant to what’s best for you.

Does the dealership stand to gain more if you chose the rebate vs. the low finance rate? The answer to that question is yes; the dealership does stand to gain more. They receive a little more in “reserve money” from the lender if you chose conventional finance rates. The fact is, however, that this point is completely irrelevant. Who cares what the dealership is making? Why is that important anyway?

Is there some rule that says a dealership is not entitled to make a profit? The only person who is doing something wrong in this scenario is you. You’re asking the wrong party for information. If the complete and honest answer might cause the dealer to make less, chances are more than likely the answers will be carefully weighed to fall on their side.

Remember: Your concern is getting the best deal for you; don’t waste time caring about what the dealership makes. Prepare yourself by considering all the facts. Please do not make the common errors of all the people we constantly hear about who overpay all the time.

Fact: People who think that dealerships are losing money on them are usually the ones who pay the most!

Note: Please understand the purpose of this, and every other post we write is NOT to condemn dealerships for making a profit. Why should a dealer not be entitled to profit? What right do we have to ask them to lose money? Would you ever go to a restaurant and tell them that you insist they sell you dinner and lose money? It’s a stretch, but equally as ridiculous. The purpose of this post is to assist fair people in getting the best deal for themselves. Protecting people from being “ripped off” by a deceptive dealership is our motivation.

We don’t claim that all dealers are unfair or “rip off artists”; we are aware that most dealers are honest and forthcoming. Although everyone is in business to make a profit and the topics are written about within these posts are to assist “fair” consumers achieve “fair” and honest deals. Why do we keep mentioning “fair”? Because equal to us having no concern about a cheating dealership, we also have no concern about the “unfair” consumers who want the good dealers to close down their business and lose money.


As we have mentioned so many times, price is not always the most important issue. The following is the only correct answer to the Rebate vs. Low rate debate: With any issue that causes you to make a decision, there are always certain facts in place; those facts make up the “pros and cons.” With any decision we make, we weigh the pros and cons and ultimately are lead to a decision. Then, of course, we hope that decision was the right one.

Remember this rule: There is always a point where the two lines will cross; that point is where you will find the correct answer. This means; some variables create change in every deal. For example, It may be a better deal for me to take the rebate, while it is a better deal for you to take the low financing rates. Let’s explain: You might be financing $30,000, and your finance term is 60 months. The Factory is offering a $3000 manufacturers rebate or 0.00% for the 60-month finance term. Which do you choose?

I might be financing $12,000 – The factory is offering a $3000 rebate or 0.00% for the finance term. Which one do I choose?

Obviously, the answers vary; your lines of “break-even” will obviously cross way sooner than my lines. The reason: different factors in the two deals will yield different answers.

Here’s how you figure out the correct answer based on your factors:

For this example, we’ll assume that you are considering a $30,000 car with a $3,000 rebate or a 0% interest rate, and for the sake of finding an answer, we’ll assume that you’re putting $3,000 a down payment, and you qualify for all offers.

1st: Draw a line down the middle of a piece of paper; on one side, write Rebate. On the other side write 0%

2nd: on the 0% side, write in the sale price of $30,000 – and on the left side (rebate), write in the sale price of $30,000 as well.

3rd: On both sides, add in your local tax rate. For instance: if you live in Queens, NY, add 8.25% as sales tax.

4th: on both sides, add $300 – this should cover DMV – Inspection and Dealer Doc Fees.

5th: On both sides – subtract $3,000 for your down payment

6th: On the rebate, side subtract $3,000 for the rebate

If you did this right, so far, you should have the following results:

Both sides: should show Sale Price $30,000 Tax $2,475. DMV $300. Sub Total: $32,775

Rebate Side Should show a $6,000.00 Total down payment and an “unpaid balance” of $26,775.00

The 0% side should show a $3,000 Total Down Payment and an “unpaid balance of $29,775.00

Assumption: If you chose not to take the 0% – the dealer offered you a 5.5% interest rate.

Compare to see where the lines cross:

Next step – find an auto loan calculator – you can go on any search engine type in “free auto loan calculator.”

I cannot attach a link to this area of the post, so I suggest a very user-friendly, free calculator (with which we have no affiliation) is chase.com. Just search:

“Free Chase auto loan calculator”



$26,775 Amount Financed

5.5% APR

60 Month Term

Answer: Payment $511.43

Total Interest: $3,910.80

Total of Payments $30,685.00


$29,775.00 Amount Financed

0% APR

Answer: Payment $496.25

Total of Payments $29,775.00

Summary: On your deal, 0% came out to be $910.80 less than the REBATE, so obviously, the better deal for you is 0%. On my worksheet, using the same method, it turned out that the rebate was quite a bit more of savings (only because I was financing much less). If I chose to finance more money, perhaps the lines would cross sooner.

Final notes to remember:

1) If you choose to lower or raise your down payment and lower and raise your amount financed, the outcome of “which one” is a better deal will vary. So, keep testing the different scenarios using the method provided above, and you will find the best deal for you. Every time!

2) Be careful – No rebate is final, while low financing isn’t: Keep in mind this significant consideration: If you choose low financing over the rebate – essentially, you just paid more for the vehicle, and you can’t get that money back. However, you chose to do so in return for free financing terms. (Very smart) You did your homework, made your decision based on solid factors, and made the overall least expensive decision. EXCELLENT WORK! Though, it would help if you remembered you made this comparison based on a 5-year repayment term.

If you keep the vehicle for 5 years and pay as expected, you win, your calculations were perfect, and you achieved the best deal for yourself. On the other hand, if something changes and for any reason, you decide that you are not going to keep this vehicle beyond the second or third year. Then, you just gave back the benefit of the low financing. The variables have changed once again, and the better deal swings back to the rebate. So remember, in the privacy non pressured environment of your own home; carefully consider all your options and likelihoods. For instance, if you know you don’t keep a vehicle beyond a couple of years, this must be considered a deciding factor.

Long story short: Always compile all the facts first, limit the variables that can change the deal, and negotiate confidently. The author of this article is an auto industry professional for the past 18 years. Robert has extensive knowledge in automotive finance and specialty automotive finance (bad credit). Having worked as a finance and special finance manager for dealerships in the New York metropolitan area since the early 90’s Robert has assisted thousands of clients in achieving automobile loans with “less than perfect” credit.

Since 2009 Robert has been working on a developed program to assist customers in the often confusing issues related to purchasing automobiles. A free service: [http://www.BuyerCents.com] assists clients with good or bad credit alike. The BuyerCents program helps people understand the “pitfalls” they should avoid while additionally assisting with the general do’s and don’ts that cause many people to overpay or get ripped off at the dealership.

Calvin M. Barker

Typical tv scholar. Problem solver. Writer. Extreme bacon fan. Twitter maven. Music evangelist. Spent a year consulting about salsa in Fort Lauderdale, FL. Spoke at an international conference about lecturing about junk food in New York, NY. Earned praise for promoting robotic shrimp in Phoenix, AZ. Spent 2002-2007 working on catfish in Naples, FL. Spent several months developing yogurt in Orlando, FL. Spent high school summers managing dandruff in Africa.