Should I take the super low financing or the big rebate? Dealerships are open and eager to make a deal

Should I take the super low financing or the big rebate? Dealerships are open and eager to make a deal

Hello loyal Beaverton readers! Thank you all for reading once again.

Over the past few weeks, we have, like many other businesses, had a huge decrease in revenue and this includes dealerships. I have been receiving many calls and emails regarding the big incentives that dealerships were offering even before COVID19. In particular, which is better, super low financing or the huge rebate? Note that this does not apply to used vehicles. Here is some information I have gathered in order to best address these questions for all of you Beaverton readers.

Before I begin however, keep in mind that I never recommend getting pre-approved for a vehicle loan. Instead, I recommend that you let the dealership (or myself) help you arrange financing. The reason? Very simple. We make the lenders compete for your business. We work smart, not hard. Plus, that will decrease the amount of inquiries on your credit report.

The Incentives

If you check the websites of local dealerships, you probably see the choice between zero/low APR financing or a cash back rebate. So how do you decide between the two?

How’s your credit?

First of all, in order to qualify for a low APR offer, you generally have to have great credit. If you don’t, then it’s an easy choice: take the cash rebate!

If you’re one of the lucky ones with solid credit, you can arrange your own financing for between 3% and 6% in today’s market. What you need to do is figure out the difference in interest rates between the low APR offer and what you can arrange on your own.

If you can arrange financing at 4% interest on your own, then a low APR offer doesn’t really look that great, especially if it’s not 0% financing. To give you a very general idea of what a cash rebate is worth in relation to comparable interest rates, I’ve done the calculations on a typical new car costing $25,000 (with state taxes of 5%).

As you can see, a $1,000 cash rebate is equivalent to a 2% difference in interest rates over a 48-month loan and 1.5% over a 60-month loan.

Cash Rebate Amount/48 mo/60 mo

$1,000/2% / 1.5%

$1,500/3% / 2.2%

$2,000/4% / 3.2%

$2,500/5% / 4%

$3,000/6% / 5%

So, let’s do an example. If you have the choice between 0% financing over 48 months or $1,000 cash back, which one should you take? Again, it depends on what kind of financing you can arrange on your own. Let’s assume you can get a car loan at 4% over 48 months.

Since the difference between the 0% financing and what you can arrange equals 4%, it makes sense to take the financing deal because a $1,000 rebate is only equal to a difference of 2% interest.

Are cars cheaper now?

Many of our readers are asking why the new vehicle pricing has not come way down in light of the COVID19

Well the answer is simple. The vehicles that are on the ground and available currently on Dealership lots, were built long before the virus took over the world. So that of course does not reduce the cost of manufacturing, this means the only way it is going to be less $ is for the manufacturer to kick in a huge rebate, or offer crazy low financing.

I hope the information has answered the questions you all have asked.

We want to help each and every one of you who want to purchase a new or used vehicle. We save you time and money. Much more than you think. We can be reached at (503) 930-1493 or visit our new website: Please do not hesitate to reach out. We will help you in your search just like we were shopping for a vehicle for ourselves. Got an automotive question? Please feel free to email me at or call (503) 930-1493.